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Books on Libya
REPUBLICAN REFERENCE
Area (sq.km)
1,759,540
Population
5,499,074
Capital
Tripoli
Currency
Libyan dinar
Leader
Col Mu'amar al-Qadhafi
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Update No: 021 - (01/08/05)
Occidental returns
In July, Occidental Petroleum ('Oxy') announced that it has officially resumed
production in Libya since the economic sanctions imposed in 1986 forced all US
oil companies to leave the country. The wells, in the prolific Sirte basin, were
turned over to a subsidiary of Libya's National Oil Company (NOC), but
Occidental received no profits. Libya's support of terrorism was the reason
offered for the embargo, and it is still on that list despite the renewed ties
since 2004. Occidental was one of the first US oil companies to produce in Libya
during the 1960's and it will now take over production of wells producing 12,000
to 15,000 barrels of oil a day. Earlier this year, Occidental won the rights to
drill additional sites over the next 5 years, as US companies earned the lion's
share of new oil drilling concessions beating many European rivals, which had
faced little American competition during the late 80's and, especially, the
90's. Occidental won nine of the fifteen on auction, which will be added to the
four it regained encompassing an area totalling 130,000 sq. km. In fact,
Occidental Chairman and Chief Executive Officer Ray R. Irani said that
Occidental would have the largest oil and gas acreage in Libya thanks to the
combination of new exploration licenses and the resumption of production at its
former wells. While Occidental's stock price moved little on news of Oxy's
resumption of Libyan production, Ray Irani believes shareholders will benefit
from the company's return to Libya predicting the company's return to the Sirte
basin will, immediately and favorably, affect its current global production
output while having significant potential to increase said output by investing
in enhanced oil recovery projects.
BP tries the personal approach
Meanwhile, the European oil majors are not willing to remain empty-handed, as it
emerged in late June that BP CEO John Browne recently met the Libyan leader Col.
Qadhafi. Browne discussed the possibility of landing a major, exclusive energy
deal. BP was not enthusiastic about Middle Eastern oil in the recent past, but
Browne was reportedly anxious to approach Libya, which produces some of the
'cleanest' oil in the world while having promising exploration opportunities.
Browne's concerns with Middle Eastern oil derives from the time and expense
consuming process that companies must go through to win contracts in Saudi
Arabia, particularly where gas is concerned, even as exploration may only yield
marginal reserves. Russian and Chinese companies along with Shell and Total took
over what opportunities BP left behind. Browne was also concerned by US
political pressure; in fact, the company cut back its Iranian activities over
concerns that it could attract negative attention from US politicians in view of
its large presence in the US.
Browne chose to meet the Libyan leader personally to avoid the competitive
auctions for exploration rights. Indeed, BP submitted bids in the recent EPSA IV
licensing round but failed to gain any rights. Browne's direct approach was well
timed to take advantage of recent Libyan concerns that the EPSA IV terms may be
too complex and deter investment, which suggests that Libya may work outside of
EPSA to sign agreements with individual companies it is interested to keep in
the country. EPSA or 'Exploration and Production Sharing Agreements' agreements
provide for foreign oil companies to receive a fixed percentage of the output
from the fields involved, negotiated on a case by case basis. EPSA I was the
model used in 1974 and EPSA II was used in 1980s, EPSA III was used in early
1990s, and EPSA IV is the current mode. Libya has an ambitious plan to double
production from the current 1.5 million bpd to 3 million bpd by 2015 - which is
still lower than Libya's peak production rate of 3.28 million bpd in 1970. The
US sanctions imposed in 1986 and the sanctions over the Lockerbie airliner crash
imposed in 1992 caused Libyan oil production to drop by over 50% over the last
decade. Libya needs investment in oil, also because its economy- despite
officially stated efforts - has not diversified and the regime's own survival is
rooted in additional oil production. Craig McMahon, a Wood Mackenzie energy
analyst in Edinburgh, believes BP is pursuing a three-pronged strategy in Libya.
BP would like to obtain an important exploration deal. BP might also want to
redevelop former Libyan National Oil Company fields from the 1960's or early
1970's, and BP could be seeking access to explore Libyan gas reserves. Shell
signed a deal with Libya a few months ago precisely for gas.
Spanish Minister Snubbed
Already a year past the thaw in Libyan-US relations-that also facilitated
European ones-Libya continues to attract positive interest from the West.
Nevertheless, one thorn persists and over the past few months it has attracted
more attention, the Bulgarian nurses' trial. Although Col. Qadhafi met the CEO
of BP, John Browne, he recently caused a diplomatic incident by snubbing the
Spanish foreign minister Miguel Angel Moratinos. The Libyan leader cancelled a
meeting with Moratinos, focusing on the fate of five Bulgarian nurses sentenced
to death. The European Union has lobbied in favor of the release of the nurses
for the last few months and hinted that Libya's membership in the Barcelona
conference would be jeopardized if it exercised the death sentence faced by the
five nurses. The Spanish newspaper El Pais described the canceled meeting as a
"serious diplomatic incident." For his part Col. Qadhafi said he was
too busy to meet Moratinos on Thursday, July 28, after the Spanish minister
waited 10 hours for the Colonel to appear.
Libya has expressed an interest and willingness to join the Euro-Mediterranean
partnership. The Barcelona Process has led the establishment of formal
mechanisms for Euro-Mediterranean cooperation and Libya has been an observer
nation since 1999. While the Libyan court charges the nurses (and a Palestinian
doctor) of having deliberately poisoned 400 children in a Benghazi hospital with
the AIDS virus, AIDS experts testified that the outbreak started before the six
medics in question ever visited the hospital and that the outbreak itself was
due to poor sanitary practices at the hospital. There is an appeal process in
place, and the court will deliver its verdict next November - postponed from
last June. It is more convenient for Libyan authorities to maintain the
appearance of blame for the incident on the external staff - most Libyan
hospitals have medical staff from other countries (Bulgaria, Philippines, Syria,
Iraq, former Yugoslavia)- than to accept responsibility. In Benghazi, where the
Qadhafi regime faced some of its toughest opposition, an admission of guilt
could spark riots.
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