Bloomberg: U.S. Oil Companies Interested in Exploration in Libya Despite Sanctions
Geneva, April 21 (Bloomberg) -- Exxon Corp., Chevron Corp.
and other big U.S. oil companies sent representatives to Geneva
to learn more about exploring for oil in Libya, in anticipation
of the day when the U.S. government allows them to again drill
for oil there.
While that day is likely years away, Libyan Oil Minister
Abdalla El-Badri at a conference made the country's first pitch
to Western oil companies since the United Nations suspended
seven-year-old sanctions stemming from the bombing of a
passenger jet over Lockerbie, Scotland, in 1988.
European oil companies already are flocking to the country,
attracted by cheap production costs and easy transport to
Europe's energy-hungry consumers. In contrast, U.S. rivals
saddled with sanctions from Washington are steered to remote,
risky areas such as the Caspian Sea to probe for the next
generation of crude oil reserves.
''The Libyan oil and gas industry once was a U.S. company
and U.S. oil-service company province,'' said Brooks Buxton,
director of Texas-based Conoco's business in the Middle East.
''It looks as though Libya is coming home. I hope that U.S. oil
companies will be a part of that homecoming.''
UN sanctions fell after Libya on April 5 handed over two
Libyan nationals accused in the Lockerbie bombing. A separate,
U.S. ban on large investments in Libya that predates the bombing
will remain in place.
At the conference, organized by CWC Associates, more than
400 representatives jammed a Geneva hotel ballroom to hear
Libya's pitch. Registrations swelled by a third this month as
news spread that sanctions would end.
Big Finds
In an increasingly competitive global industry, U.S. oil
companies are in danger of falling behind their European rivals
in the next round of oil exploration. Iran also is seeking
Western help -- in its case to develop the world's fifth largest
oil reserves -- yet sanctions also bar U.S. firms from the Gulf
nation.
In Tehran this week, Iranian oil ministry officials at
their own investment conference said they planned to accelerate
the issue of oil production licenses that attracted $2 billion
of investment in the past two months from European oil companies
such as Elf Aquitaine SA of France and Eni SpA of Italy.
The ban in Libya is particularly painful. U.S. oil
companies starting with Exxon and Mobil in 1955 were the first
to identify the north African nation as a potential oil producer
and to find oil. The oil minister, himself a former Exxon
employee, now oversees proven reserves of almost 30 billion
barrels, about as much as is left in the North Sea.
After the initial finds, other U.S. oil companies such as
Occidental Petroleum Corp. of California, Marathon Oil Co. of
Texas and Amerada Hess Corp. of New York brought key technology
that built Libya into the world's fourth-biggest oil exporter
when its oil output peaked in 1970.
''Libya recognizes the U.S. companies made a major
contribution to build their oil industry,'' said Joe Darby,
chief executive of Lasmo Plc, Britain's No. 2 oil explorer,
which two years ago made the biggest Libyan oil discovery in a
decade. ''They have a great regard for the skills of U.S.
companies and want them back.''
In spite of the early leg up, it's now Europe's oil
companies like Lasmo that dominate Libya's oil sector. Eni,
Repsol SA of Spain, OMV AG of Austria and their partners produce
about a third of Libya's output -- now less than half its peak
at about 1.38 million barrels a day.
U.S. companies make no secret of their desire to return.
Conoco, Hess and Marathon were the last to leave the nation in
1986, when then-President Ronald Reagan ordered them out in
response to accusations that Libyans were behind terrorist
incidents in Berlin, Vienna and Rome.
Lost Revenue
Conoco estimates it lost $5 billion in revenue associated
with its Libyan assets, which are being used by the Libyan
government while held in trust if the U.S. companies are allowed
to return. It and other U.S. oil companies lobby to limit U.S.
sanctions through a Washington-based group called USA Engage.
For its part, Libya is anxious to allow the U.S. majors
back. Half of the government's revenue comes from oil, and
Benchmark Brent crude oil fell 31 percent last year. Libya wants
to boost output capacity to 2 million barrels a day to insulate
itself from price declines.
U.S. oil companies -- and U.S. oil service companies such
as Halliburton Co. and Baker Hughes Inc. -- are expert in
reviving output from aging oil fields. Lobbying by Conoco and
others to end Libya's economic isolation, which would ease the
nation's quest for investment, won friends in Tripoli.
''Their interests are protected,'' said Hammouda El-Aswad,
chairman of the state-run National Oil Corp. ''They are welcome
back any time they want to resume operations.''
No Comment
For the record, all the U.S. oil companies at the meeting
said they have no intention of breaching U.S. sanctions,
especially a 1996 law that forbids annual investment of more
than $40 million in the nation's oil industry. They characterize
their presence at the Geneva meeting as an information-gathering
exercise. Many decline to speak for attribution on the issue.
Mobil Corp. said it's had no contact with Libya since it
pulled out in 1982. Conoco spokesman Carlton Adams said all his
company's contacts with Libya have been ''by the book'' after
review by the U.S. State Department.
And some companies not based in the U.S. but likely to face
sanctions if they moved into Libya say explicitly they aren't
interested. BP Amoco Plc of London said it's too busy with other
projects to weigh entering Libya.
''Certain large oil and gas companies still are not going
to invest in Libya and the reason for that is because of the
American legislation'' imposing unilateral sanctions, said
Anthonius de Vries, European Commission coordinator for economic
and financial sanctions.
Fact Finding
Even so, just about all the top U.S. companies were present
at the conference -- Exxon, Chevron, Texaco Inc. and Amerada
Hess all were represented. A few smaller independent oil
companies are keeping an eye on Libyan developments. Burlington
Resources and Union Pacific Resources Corp. also had employees
registered at the conference.
For these companies, the economic fact is they can't afford
to ignore Libya after a two-year oil price slump that drove the
value of a barrel of oil to a 12-year low in December.
''There's a very simple statistic. To exploit oil in Libya
costs only $5 a barrel,'' said George Joffe, who studied Libya
for 20 years at the Royal Institute of International Affairs, a
London-based policy consultant. ''Even with oil prices at $10 a
barrel, it's interesting. U.S. oil companies are already very
disappointed'' they can't return.
At least they can't return just yet. The U.S. State
Department has said it still has concerns that Libya sponsors
terrorism and seeks chemical weapons, both issues that suggest
sanctions won't be lifted any time soon.
But the 1996 sanctions law expires in 2001, and companies
including big names such as Boeing Co., Caterpillar Inc. and
International Business Machines Corp. have joined the fight
against sanctions as a major policy tool. Unless Congress renews
the law, a major roadblock barring U.S. investment in Libya
could disappear.
bloomberg.com |
