Libya has positioned itself as a serious contender for upstream investment with its 2025 Licensing Round, the country’s first in nearly two decades, featuring significantly improved fiscal terms that compare favorably with regional competitors across North Africa and the Mediterranean.
Launched in March 2025, the round includes 22 blocks spanning the Sirte, Murzuq, and Ghadames basins, along with prospective offshore zones in the Mediterranean. At the heart of the offering is the new fifth-generation EPSA V contract, which replaces the older EPSA-IV model and dramatically improves contractor economics. Under EPSA V, contractor internal rates of return can reach as high as 35.8%, compared with approximately 2.5% under the previous regime.
The restructured contract removes the restrictive B-Factor mechanism and introduces a more predictable sliding R-Factor tied to profitability ranges. Cost recovery has been streamlined through a two-bucket system that accelerates payback, while the National Oil Corporation’s assumption of tax payments reduces fiscal complexity and administrative burden for international operators.
When compared with regional peers, Libya’s offering stands out. Algeria’s upstream regime under the 2019 Hydrocarbon Law involves multiple fiscal layers, including hydrocarbon royalties typically at 10%, hydrocarbon-revenue tax ranging from 10% to 50% depending on project profitability, a 30% corporate income tax, and a 30% tax on contractor remuneration. While flexibility exists for technically challenging projects, the layered nature of these charges creates variable net returns and fiscal complexity.
Egypt has renegotiated some concession agreements to enhance commercial terms, with certain deals offering up to 40% cost-oil allocations and profit-oil shares in the high-20% range. However, many agreements continue under traditional production sharing agreement terms with tiered profit splits and more rigid cost-recovery rules than Libya’s updated framework.
Libya’s higher internal rates of return, transparent fiscal terms, and accelerated cost recovery strengthen its competitive position as investors evaluate opportunities across the Mediterranean and North Africa. The country’s existing midstream and export infrastructure, combined with proximity to European markets, further enhances project viability and development timelines for potential investors.
Source: energycapitalpower.com