Why Libya’s Next Oil Pipeline Could Be a Geopolitical Game-Changer

Cyril Widdershoven

Cyril Widdershoven is a senior maritime, energy, and geopolitical analyst and Senior Advisor at Blue Water Strategy, specialising in the strategic intersection of shipping, ports,…

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• Libya and Egypt are reviving an 800-km oil pipeline linking Tobruk to Alexandria, likely starting at 150,000–250,000 bpd.
• Egypt gets crude that bypasses Hormuz, Bab el-Mandeb and Suez, while Libya gains another export route.
• Costs could reach $1.5–2+ billion, with first oil realistically around 2030.

The proposed Libya–Egypt crude oil pipeline has, surprisingly quickly, entered a phase in which Cairo and Tripoli are actively discussing it. The pipeline, expected to be 800 kilometers long, will connect Tobruk in eastern Libya to Egypt’s port of Alexandria, allowing Libyan crude to flow directly into Egypt’s Mediterranean refining system. With an expected cost of over $1 billion, it represents a significant strategic opportunity. However, neither the final capacity, financing structure, nor investment decision has yet been agreed.

This is important, as the total project is not yet fully financed. The current analysis indicates that Egypt and Libya are discussing financing mechanisms, implementation arrangements, and final throughput. Still, there are major hurdles on the road, as no international bank, sovereign wealth fund or IOC has publicly committed to it. The current project costs should now be regarded as a preliminary cost indication rather than a bankable EPC estimate. Ensuring geopolitical stability is crucial for project success and risk mitigation.

The project itself is not new, as both countries, Egypt and Libya, examined essentially the same corridor more than two decades ago. In 2002, the two countries were already developing twin Tobruk–Alexandria oil and gas pipelines. The Arab Company did this for Oil and Gas Lines, a 50:50 JV between Libya’s NOC and Egypt’s EGPC/GASCO. At that time, the total pipeline was expected to be 620 km and was initially designed for 150,000 bpd. Even mine clearance along the route had reportedly been undertaken. The current proposal is now an entirely new geopolitical idea, but more the resurrection and substantial enlargement of an old one.

Pipeline issue	Assessment – August 2026
Proposed route	Tobruk/El-Hariga area – Egyptian border – Matrouh corridor – Alexandria
Reported length	~800 km
Official preliminary cost	>$1 billion
BWS realistic CAPEX range	$1.3–2.2 billion, potentially higher with storage/pumping/refinery integration
Capacity under discussion	Not yet officially fixed
Historical design	150,000 bpd
BWS likely Phase I	150,000–250,000 bpd
Expansion potential	300,000–400,000 bpd, subject to Libyan production
Likely owners/backers	NOC/AGOCO + EGPC/state entities; possible infrastructure investors/Gulf capital later
Egypt use	Domestic refining, import substitution, strategic stocks, product exports
Libya use	Alternative export corridor + Egyptian refining of Libyan crude
Earliest realistic FID	2027
Earliest realistic operation	2029–2030
Principal risk	and security fragmentation pose the principal risks to the pipeline, overshadowing engineering challenges and emphasizing the geopolitical complexity that could impact project feasibility and stability.

Geopolitical and oil market developments in 2026 are now supporting the economic logic behind it. Egypt has become increasingly exposed to Middle Eastern maritime disruption. After the disruption of Kuwaiti supplies due to the Hormuz Strait, Cairo already moved to purchase at least 1 million barrels per month of Libyan crude. At the same time, Libya and Egypt continued to advance the January Libya–Egypt energy cooperation agreement, studying crude and natural gas transportation between the countries. At present, Cairo is simultaneously trying to expand its strategic petroleum reserves as disruptions to the Strait of Hormuz expose the vulnerability of tanker-based supplies.

When taking into account Egypt’s situation, this is much more than another pipeline, as it creates a Mediterranean crude supply source completely outside Hormuz, Bab el-Mandeb, and Suez. Every single barrel entering at Tobruk will never be exposed to chokepoints, offering long-term resilience and market security for stakeholders.

At the same time, the refining argument is equally compelling. Alexandria is already Egypt’s principal refining cluster, with MIDOR alone operating at around 160,000–170,000 bpd, after a $2.7 billion expansion. It processed more than 49 million barrels during 2025. Alexandria Petroleum and Amreya are also adding additional refining capacity. The country’s nameplate refining capacity has historically exceeded 760,000 bpd, but in practice throughput is much lower and varies substantially by refinery.

A 150,000-bpd Libyan pipeline is expected to deliver almost 55 million barrels per year. If reaching 250,000 bpd, the total would be 91 million barrels, and reaching 300,000 bpd would be roughly 110 million barrels. The pipeline itself is therefore small relative to the value of commodity flows it could support.

For Egypt, it would mean several options. Libyan crude could replace more expensive or vulnerable imported barrels. It would also be able to feed MIDOR and other Alexandria refineries. Domestic refined products, especially gasoline, diesel, and jet fuel, could be consumed domestically. At the same time, it would be able to export higher-value surplus products from Alexandria/Dekheila into Mediterranean markets. MIDOR has pipeline connections to Dekheila for product exports. This total enables Cairo to effectively convert geographic proximity to Libyan crude into refining margins, employment, FX savings, and, in surplus periods, export revenues.

For Libya, the logic is different but equally interesting. Libya’s national oil company, NOC, targets a substantial increase in national production from today’s roughly 1.4–1.5 million bpd. The goal is already linked to a January 2026 TotalEnergies/ConocoPhillips agreement targeting more than $20 billion in investment, with potentially very large increases in Waha capacity. If all goes as planned, Libya will need to build additional resilience in its evacuation, storage, and marketing infrastructure. Here Egypt comes into the picture.

Eastern Libya is particularly suited to an Egyptian connection. Sarir crude already travels hundreds of kilometers toward the Tobruk/Hariga export system. NOC’s 2025 annual report shows continuing investment in replacing sections of the 34-inch Sarir–Tobruk line. There is a 100-km replacement program. Setting up the system to link eastwards towards Egypt would create an alternative to tanker exports from Hariga.

Taking this into account, 150,000–250,000 bpd is clearly the commercially sensible starting range. Building immediately for 400,000–500,000 bpd will, at present, entail the risk of creating stranded capacity. These higher levels will be only realistic if Libya successfully pushes national production towards 2 million bpd. Technically, there is still room to design the system hydraulically for later expansion, as larger pumps and additional pumping stations could eventually increase throughput without duplicating the entire right-of-way.

When looking at the $1 billion headline cost, the total looks aggressive. An 800-km cross-border crude system, however, will require the pipeline itself, pumping stations, metering, SCADA, power, border facilities, storage, security systems, cathodic protection, Alexandria receiving infrastructure, and connections to Egyptian refineries. Even though desert construction is technically straightforward compared with mountainous or subsea pipelines, security and logistics premiums are substantial. Given worldwide needs and market developments, it is more realistic to expect a $1.3–2.2 billion planning envelope. If parties are even considering storage facilities and downstream modifications, we will be looking at $2.5 billion. Still, these figures are not based on an announced project budget.

Financing will be the decisive test. NOC/AGOCO and EGPC are natural anchor participants, potentially recreating a structure similar to the original bilateral JV. It is entirely feasible to expect Gulf sovereign or infrastructure capital, especially since Egypt already has a long history of joint Arab investment in energy infrastructure. SUMED is the obvious model: Egypt operates it jointly with Gulf shareholders, and the system moved around 50 million tons of crude in 2025. By looking at international infrastructure funds, export credit agencies, and EPC-backed financing, this will be possible. Still, lenders will demand strong sovereign guarantees and protection against political disruption in Libya.

Ultimately, there will be the political or geopolitical issue to deal with. Tobruk and much of eastern Libya sit within the political-security sphere associated with Khalifa Haftar and the eastern authorities. This is critical to keep in mind, as current pipeline discussions have focused on engagement between Cairo and Abdulhamid Dbeibah’s Tripoli-based Government of National Unity. As long as Libya remains divided between rival power centers, any pipeline will be an instrument of power politics. It cannot safely become an asset belonging politically to only one side while NOC revenues remain nationally sensitive.

The August drone attacks around Zawiya damaged petroleum storage infrastructure and have also shown that security risks are real. At the same time, protests recently penetrated the Mellitah energy complex. Most attention will be paid to the fact that a new international pipeline carrying several billion dollars in crude annually would inevitably become both a strategic asset and a potential coercive target.

Yet this is precisely why the project deserves attention. The Libya–Egypt pipeline is more commercially viable today than it was twenty years ago. Both sides will benefit from the project. At the same time, both governments want deeper economic integration, while the physical distance is manageable.

For analysts, the biggest mistake will again be to judge the project solely on whether a $1 billion pipeline can earn a transportation tariff. The project’s strategic value is considerably larger. Not only will 200,000–250,000 bpd underpin $5–7 billion in annual crude flows, but it will also reduce Egyptian seaborne supply exposure. It will also monetize additional Libyan production and establish Alexandria as an even stronger Mediterranean crude-and-products hub. Still, the project is at present technically highly feasible, strategically compelling, but politically high-risk. Keep in mind that a 2027 FID, followed by construction during 2028–2029, could theoretically deliver first oil around 2029. Reality will certainly be more like 2030. Cost escalation towards $1.5–2+ billion should already be assumed. Technically, there are no issues. The real concern is whether Libya can guarantee that the crude entering that pipe today will still be politically, legally, and physically available twenty years from now.

By Cyril Widdershoven for Oilprice.com

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