Libya threatens to nationalize its oil industry
Libya may nationalize its oil industry to control production as oil prices have plummeted over 70% over the past year, said Muammar Qadhafi, the country's leader.
LONDON, Jan. 26 -- Libya may nationalize its oil industry to control production as oil prices have plummeted over 70% over the past year, said Muammar Qadhafi, the country's leader.
Speaking during a televised address at Georgetown University in Washington last week, Qadhafi said, "Oil exporting countries may look to nationalization because of the rapidly declining prices." He added that, at the current low prices, "we may refuse to sell it (oil)." Oil prices need to increase to $100/bbl to halt talks of nationalization, Qadhafi said.
According to state-run media, there is increasing pressure on the nation's legislative and executive bodies to vote for nationalization of oil companies.
Qadhafi even suggested that Libya may reject OPEC's quotas by withholding production from the global markets to help boost prices. "We would not adhere to OPEC's regulations because our livelihood depends on oil." However, he gave no details on implementation.
Thought not likely
Some analysts said, however, that it is highly unlikely that Qadhafi would follow through on these threats as it is seeking foreign investment to improve its oil and gas sector. Libya recently renegotiated several exploration contracts with foreign companies.
Current operators such as Repsol YPF SA, Eni SPA, and Petro-Canada have said they have received no notification that Libya would nationalize its oil industry and were skeptical about the idea.
"Given Libya's dire need of technology and investment—as well as the damage to its international relations a nationalization would inflict—he is most likely pressurising remaining IOCs to agree to tighter terms and trying to influence the oil markets," said consultant IHS Global Insight.
Its comments were mirrored by Citigroup, which said: "We see nationalization by Libya as extremely unlikely." The bank added that "the statements are more likely to be a precursor to upcoming contract negotiations with oil majors, designed to strengthen the government's hand."
By drawing attention to the global economic meltdown and its effect on oil demand and prices, Qadhafi has highlighted the government's vulnerability as it would cofinance multibillion projects that were predicated on higher prices last year.
Operators are delaying or cancelling oil and gas projects due to price slumps and economic uncertainty, which, in the long term, is likely to exacerbate oil prices, analysts have warned.
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