National Oil Corporation to End Oil-for-Fuel Trade System by March 2025

The National Oil Corporation (“NOC”) has announced its decision to end the oil-for-fuel system for fuel supplies starting March 2025, following a request from the Audit Bureau. The NOC emphasized the need for timely allocation of budgets to ensure the continuation of fuel supply operations.

In an official communication to the Minister of State for Cabinet Affairs of the Government of National Unity, the Acting Head of the NOC, warned that if funds for the fuel budget are not secured, the NOC cannot be held accountable for potential consequences. These could include traffic congestion or operational disruptions at power stations and other critical facilities due to delays or non-payment of dues.

The Acting Head also pointed out that there is still an opportunity to implement a payment mechanism approved by the relevant authorities by March 2025. He revealed that the Audit Bureau verbally agreed last week to allow the continuation of the oil exports compensation system for February to meet immediate market demands until the Central Bank of Libya finalizes the fuel budget allocation.

The Audit Bureau had earlier recommended discontinuing the oil-for-fuel trade system in 2025. However, the NOC, in correspondence dated January 7, 2025, highlighted the challenges of immediately halting the system, as December supplies had already been arranged under this framework. The NOC suggested a temporary extension to bridge the gap until the Central Bank implements a payment mechanism via letters of credit.

The NOC further clarified that delays by the Central Bank of Libya and the Ministry of Finance in disbursing budgets had forced it to rely on the trade system to secure fuel supplies. Despite providing detailed explanations about the potential risks of these delays, no corrective actions were taken by the relevant authorities.