In the wings

March 28, 2003
Few analysts dispute Iraq's powerful allure as a long-term investment opportunity. But the actual payout may take several years, if not a decade or longer after US-led military action ends.

Maureen Lorenzetti

Few analysts dispute Iraq's powerful allure as a long-term investment opportunity. But the actual payout may take several years, if not a decade or longer after US-led military action ends.

In the shorter term, Libya is a promising interim prospect, given that relations with the US may be improving.

Earlier this month Libya reached a tentative agreement with the US and the UK to accept civil responsibility for the 1988 bombing of Pan Am Flight 103 over Lockerbie, Scotland, and to pay the families of the 270 victims $5-10 million each, depending on how fast the US and the United Nations lift commercial sanctions (OGJ, Mar. 17, 2003, p. 33).

No timetable
Department of State officials are not predicting when or if the Libyan proposal will be finalized or when the US will consider lifting its own sanctions.

"I don't have any way of predicting exactly how long right now. It's not an instantaneous sort of thing," said a state department spokesman Mar. 12 after the US met with Libyan and UK officials in London.

Lawyers for the Lockerbie victims say a subsequent meeting with the son of Libyan leader Moammar Qaddafi was encouraging. They said Qaddafi's son made it clear his country wants to settle so it can resuscitate its moribund oil sector. The country wants to boost its production capacity to 2 million b/d from 1.5 million b/d within 5 years.

US companies, however, understand that an agreement does not signal the imminent opening of Libya's oil and gas sector to them. Lobbyists say both the White House and Congress may fear that the political price for lifting sanctions is too high, even if the victims' families endorse the plan. Conversely, the White House may want to ease sanctions as a goodwill gesture to European allies unhappy with US actions against Iraq.
But until the war is over, possibly by May, investment timelines for Libya, as well as for Saudi Arabia and Iran, appear to be frozen.

"We are very concerned about the war with Iraq and its potential impact on our settlement," lawyers for the Lockerbie families told their clients. "While our latest meeting validates our optimism regarding a settlement, we must remain cautious because the war's effect on foreign relations is unknown."

Oil company interest
Several non-US oil companies have agreements with Libya's state-owned National Oil Co. The largest foreign producer in Libya is Italy's ENI SPA, which has been operating in the country since 1959.

Until the mid-1980s, US companies also had a long history in Libya. Occidental Petroleum Corp. made the first major oil discoveries in the country in the 1970s.

Amerada Hess Corp., Conoco Inc. (now ConocoPhillips), and Marathon Oil Co. have been partners in the Libyan "Oasis" oil concession that began in the mid-1950s. The Oasis group produced about 850,000 b/d in 1986 before the US forced the companies to leave. Two other US oil companies, Exxon Corp. and Mobil Corp., (now ExxonMobil Corp.) left Libya in 1982 after the US imposed a trade embargo.

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