Al-Shalwi: Between Spending and Investment… Why Does the National Oil Corporation’s Budget Differ from the Rest of the State’s Budgets?

By: Oil and Economic Expert Abdulmonsef Mahmoud Al-Shalwi

Every time public budgets in Libya are discussed, attention turns to spending figures and the size of allocations designated for different sectors. Debate intensifies over spending priorities, their fairness, transparency, and effectiveness. This is a legitimate and healthy debate in any country seeking to establish the principles of governance and accountability.

However, despite the importance of this debate, it sometimes conflates two fundamentally different types of spending: the first is government spending aimed at providing public services, while the second is investment and operational spending aimed at producing wealth itself.

This is where the National Oil Corporation’s particular nature lies.

The National Oil Corporation’s budget is not merely a financial item added to the other areas of public expenditure. Rather, it represents, in essence, the investment that enables the state to generate most of its revenues. Therefore, viewing it through the same lens used to assess the budgets of other government entities can lead to inaccurate conclusions, and perhaps even to decisions whose economic cost is far greater than the financial savings believed to have been achieved.

A Rentier Economy… Driven by Oil

Libya is still classified as a rentier economy, as its economy relies primarily on oil and gas, which account for the overwhelming majority of exports and provide more than 90% of the state’s public revenues. They also represent the main source of foreign currency on which the country relies to finance imports, maintain its reserves, and stabilize its currency’s exchange rate.

Consequently, any disruption affecting the oil sector does not impact only the National Oil Corporation or its affiliated companies. Its effects extend directly to public finances, the banking sector, the foreign exchange market, electricity, subsidies, services, salaries, investment, and even economic and social stability.

Therefore, financing this sector should not be viewed as spending on an institution, but rather as an investment in the sustainability of the entire national economy.

Not a Consumption Budget… But a Production Budget

It is important for the public to distinguish between two types of spending.

There is consumption spending that does not generate direct income for the state, while there are operational and capital budgets that lead to the production of the oil and gas on which the state relies to finance all of its obligations.

The National Oil Corporation’s operational budget finances daily operations, maintenance of fields, facilities, pipelines, ports, control systems, industrial safety, laboratories, service company fees, spare parts, chemicals, maritime and air transportation, and other activities that ensure uninterrupted production.

The investment (capital) budget, meanwhile, represents genuine investment in the future. It finances field development, drilling new wells, constructing pipelines, expanding production facilities, gas projects, infrastructure, gas-flaring reduction programs, digital transformation projects, and efforts to improve operational efficiency, thereby ensuring that current production capacity is maintained and increased in the future.

In other words, these budgets are not simply consumed; they are transformed into productive assets that generate revenues for decades to come.

Delays… Are No Less Dangerous Than Withholding Funding

Some believe that the problem begins only when a budget is not approved, while the reality is more complex.

In the oil and gas industry, time itself is an economic factor.

Delays in approving budgets, even if temporary or justified by financial or legal procedures, may lead to the postponement of preventive maintenance programs, delays in the delivery of equipment and spare parts, deferral of drilling and development activities, contract rescheduling, and higher implementation costs due to changes in global prices. They may also result in the loss of certain investment opportunities that do not wait for those who hesitate.

In many cases, the cost of delay is greater than the value of the allocation itself, because restarting projects or compensating for declining production requires additional investment, more time, and greater effort.

For this reason, advanced oil-producing countries do not treat financing their oil sectors as merely a financial matter. Rather, they view it as a strategic issue linked to the country’s economic security.

Oil Waits for No One

The world is currently witnessing unprecedented competition for energy markets.

Some countries are expanding their production capacities, others are developing their infrastructure, while others are investing billions of dollars in natural gas, petrochemicals, low-emission energy, enhanced oil recovery technologies, and digital transformation.

Libya, meanwhile, possesses competitive advantages that are difficult to replace: vast reserves, high-quality oil, gas located close to European markets, an exceptional geographical position, infrastructure that can be developed, and accumulated national expertise.

But these advantages alone are not enough.

Any opportunity that is not seized at the right time may become an opportunity for another country that is more prepared and faster in making decisions.

Therefore, stable financing is one of the most important factors in maintaining the competitiveness of Libya’s oil sector.

The Experience of Producing Countries… A Common Lesson

Looking at the experiences of leading oil-producing countries, we find that governments view their national oil companies as engines of economic growth.

Major national companies such as Saudi Aramco, ADNOC of the UAE, QatarEnergy, Algeria’s Sonatrach, Norway’s Equinor, and Brazil’s Petrobras benefit from stable financing programs that enable them to implement their operational and investment plans according to clear timelines. These countries understand that every dollar invested in developing the sector can generate several times its value for the national economy.

This does not mean an absence of oversight. On the contrary, these companies are subject to strict systems of governance, disclosure, auditing, review, and accountability, creating a balance between speed of implementation and protection of public funds.

Transparency and Governance… Two Sides That Cannot Be Separated from Financing

Calling for the necessary financing for the oil sector does not in any way mean calling for unrestricted spending.

Responsible financing must always be accompanied by transparency, disclosure, governance, oversight, risk management, independent review, and compliance with applicable laws and regulations.

In this context, it is important not to overlook the notable progress made by the National Oil Corporation in recent years in terms of institutional disclosure. It has begun issuing monthly and periodic reports on production, revenues, and activities, in addition to explanatory statements when necessary. This approach has strengthened the confidence of observers, reinforced a culture of communication with the public, and placed the Corporation in an advanced position compared with many public institutions in Libya.

This does not mean that the development process is complete, as governance is an ongoing process. However, it is fair to acknowledge what has been achieved and build upon it.

A Collective Responsibility… Not the Responsibility of One Institution Alone

Some may believe that defending stable financing for the oil sector is solely a matter concerning the National Oil Corporation. The reality, however, is that it is a shared national responsibility.

The state is required to provide an appropriate legislative and financial environment; oversight bodies are required to ensure the soundness of spending; the Corporation is required to continue improving performance and transparency; and the public is also called upon to understand the nature of this sector and avoid treating it according to conventional comparisons with other public entities.

The oil sector’s budget is not a privilege granted to an institution. It is an investment in maintaining the resource that finances the entire state.

A Final Word

The real question is not: How much does the state spend on the National Oil Corporation?

Rather, it should be: How much will the state lose if it does not provide the Corporation with the operational and investment financing it needs at the right time?

Oil and gas are not merely two commodities for export. They are the backbone of the Libyan economy, the foundation of financial stability, the main source of foreign currency, and the lever on which the state budget, services, salaries, development, and economic security depend.

Therefore, the National Oil Corporation’s operational and capital budgets should be understood as high-return national investment, rather than as a conventional government expenditure item.

When the public understands this reality, it will be better able to distinguish between spending that consumes resources and spending that creates them, and between expenditure whose impact ends with the close of the fiscal year and investment that preserves the state’s source of livelihood for decades to come.

Ultimately, protecting the oil and gas sector is not the responsibility of any single institution. It is the responsibility of the state and society as a whole, because the strength of this sector means a stronger economy, its stability means Libya’s stability, and any disruption to it—even if caused by delayed financing—will affect not only fields and facilities, but will extend to every Libyan household, every institution, every development project, and every citizen hoping for a more stable and prosperous future.