WATCHING THE WORLD A HARD LINE ON LIBYA

With Roger Vielvoye from London The U.S. government's firm line on American companies trading with unfriendly nations continues to cause heartaches in the oil industry. Sanctions imposed against Libya in 1986 have left five U.S. companies with extensive exploration and production assets in Libya they cannot service.

March 25, 1991

3 min read

The U.S. government's firm line on American companies trading with unfriendly nations continues to cause heartaches in the oil industry.

Sanctions imposed against Libya in 1986 have left five U.S. companies with extensive exploration and production assets in Libya they cannot service.

On the other side of the world, U.S. companies have watched enviously as non-U.S. operators picked up prime acreage off Viet Nam, currently the Far East's exploration hot spot. All drilling and seismic surveys are being undertaken by European and Asian companies using non-U.S. equipment.

THE LIBYAN SITUATION

But the frustration of being barred from Viet Nam is nothing compared with the administrative mess in which the five U.S. companies in Libya find themselves.

Since President Reagan imposed economic sanctions in 1986, onshore operations previously run by units of Amerada Hess, Conoco Inc., W.R. Grace, Marathon Oil, and Occidental Petroleum have been subject to a standstill agreement.

Under this agreement, the companies maintain their equity interests in ventures with Libya's National Oil Co. (NOC). But they don't lift oil, play a part in day to day operations, or make contributions to any new investments in the license areas. NOC is in complete control of the fields, finances all investments, and sells all production.

Recently, press reports indicated Libya was becoming frustrated with this situation and was looking for non-U.S. buyers for the assets.

The five companies may or may not have been relieved to hear that these reports are untrue. Libyan Oil Minister Abdallah al-Badri told the Middle East Economic Survey, Cyprus, Libya has no intention of selling the U.S. assets to third parties.

Libya, he said, considers the standstill agreement with the five companies valid. He added that the U.S. companies will be welcomed back as full partners any time. That, he explained, will require the companies to perform their obligations "as before the standstill agreement."

For that to happen the U.S. administration will need to take a far more relaxed view of trading with Libya.

The original standstill agreement was a temporary measure designed to keep U.S. assets in a state of suspended animation for 3 years to June 1989.

NO RETURN TO NORMALCY

Libya and the companies hoped Washington would remove most of the restrictions and allow a return to near normalcy by mid-1989.

Instead, the administration told the five companies they could operate through non-U.S. subsidiaries and return to lifting Libyan oil if it were not exported to the U.S. The offer did not go far enough for Libya. It wants to sell its oil in the U.S., use U.S. made equipment, and have personnel trained by U.S. companies.

In the face of Washington's refusal to make further concessions in 1989, Libya extended the standstill agreement indefinitely and, as indicated by the latest statements by the oil minister, seems prepared to sit and wait for a change of attitude from across the Atlantic.