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Key Economic Data 
  2003 2002 2001 Ranking(2003)
Millions of US $ 19,131     71
GNI per capita
 US $ n/a n/a
Ranking is given out of 208 nations - (data from the World Bank)

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Libyan dinar 

Col Mu'amar al-Qadhafi

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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