Sam Fletcher
Senior Writer
HOUSTON, May 6 -- US and Libyan businessmen and government officials must work together to repair US-Libyan relations, said Ambassador Ali Suleiman Aujati at a breakfast meeting on the final day of the Offshore Technology Conference in Houston.
Although Libya finally extradited suspects and paid reparations for the December 1988 terrorist bombing of a Pan American airliner that killed 280 people at Lockerbie, Scotland, and has since disposed of its weapons of mass destruction, Aujati said, "Americans still don't trust Libyans." He said, "We have to sit together and get over our problems."
In April 2004, President George W. Bush lifted some of the US trade sanctions previously imposed against Libya. But other sanctions remain in place as Libya is still designated as a state sponsor of terrorism. Although relations between the US and Libya are "slowly improving," said Aujati, "we expected by now to have more US companies involved in Libya, but so far it has been mostly energy companies."
Libya has oil reserves estimated at 39 billion bbl, including 12 oil fields each with reserves of 1 billion bbl or more, and two with reserves of 500 million-1 billion bbl. Yet Libya remains largely unexplored, with excellent potential for more oil discoveries, said Tony Mills, vice-president of global consulting with Wood Mackenzie Ltd.
The Libyan government has announced plans to increase production to 2 million b/d by 2007 from 1.3 million b/d in 2004 and by 2010 to return to 3 million b/d, the point at which its production peaked in the early 1970s.
On Jan. 29, bids were opened for the first tender of Libyan exploration areas in which US and UK companies were permitted by their governments to participate in more than 2 decades. Winners of that latest tender will be required to enter into exploration and production-sharing agreements with the national oil company, based on the fourth-generation exploration and production sharing agreement (EPSA-IV) model form (OGJ, Apr. 18, 2005, p. 29).
Libyan content rules under that form "are simultaneously strict and vague," said Shane R. DeBeer, a partner in Chadbourne & Parkes LLP. The form stipulates, "Operator shall at all times give priority to Libyan contractors, provided they are competitive in terms of performance, price, and availability." However, it doesn't define "priority" or "competitive," said DeBeer.
The section on Libyan personnel is also ambivalent, he said. "Effectively, the operator must hire only Libyan nationals to carry out 'petroleum operations' (virtually all operations) except 'in cases where specialized technical personnel or key management positions are required and not available among Libyan personnel,'" DeBeer said. Although that section "arguably does not apply to contractors," he said, another section requires operators to "give priority to local supplies, equipment, and services, provided they are competitive in terms of performance, price, and availability."
However, EPSA-IV does improve a foreign partner's leverage in management, he said. EPSAs are governed by Libyan law but are subject to arbitration in the International Chamber of Commerce in Paris. "Libyan law is fairly unique and can very approximately be described as a mixture of Islamic law and Italian civil law," said DeBeer.
Operating in Libya presents a variety of challenges, DeBeers said. All Libyan companies must be Libyan-controlled, with foreign companies generally operating "through either a branch or a branch of a subsidiary." Registration of a branch is a bureaucratic and time-consuming procedure, he said. Moreover, most documents must be submitted with an Arabic translation attested by the People's Bureau of the Jamahariya in the jurisdiction of the parent company.
"Libyan labor law is comprehensive and considered by many foreign companies to be proemployee," said DeBeer. "All Libyan labor is unionized."
Contact Sam Fletcher at [email protected]
