WATCHING GOVERNMENT LIBYA'S PROBLEMS AND PROSPECTS

With Patrick Crow from Washington, D.C. Increased U.N. Security Council sanctions against Libya took effect Dec. 1, and some diplomats expect the U.N. to take even tougher action later. The sanctions, prompted by the Qadaffi regime's refusal to extradite two suspects in the 1988 bombing of a Pan American jetliner over Scotland, freeze Libya's foreign assets and ban the sale of certain oil industry equipment to the country (OGJ, Nov. 22, Newsletter).

Dec. 6, 1993

3 min read

Increased U.N. Security Council sanctions against Libya took effect Dec. 1, and some diplomats expect the U.N. to take even tougher action later.

The sanctions, prompted by the Qadaffi regime's refusal to extradite two suspects in the 1988 bombing of a Pan American jetliner over Scotland, freeze Libya's foreign assets and ban the sale of certain oil industry equipment to the country (OGJ, Nov. 22, Newsletter).

The U.S. Senate recently urged President Clinton to seek a full international oil embargo against Libya. A unilateral U.S. embargo has been in effect since 1982.

PRESSURES FOR CHANGE

Last week the Center for Strategic and International Studies in Washington, D.C., held a conference on the multiple pressures for change in Libya.

Abdussalam Zagaar, a Houston consulting engineer, said U.S. trade sanctions have resulted in inadequate maintenance and deteriorating hardware at refineries and oil fields, pushing Libya to the brink of an "environmental disaster."

Suleiman Bengharsa, an international consultant, pointed out Libya has 45 million bbl of oil reserves, mostly light and sweet.

He said, "I have yet to meet an international oil company executive who is not interested in Libya. In fact, many U.S. oil company people are preparing themselves for the day they will be allowed to do business in that country."

Increasingly isolated in the 1980s, he said, Libya revised production sharing agreements in its third round of exploration in 1988 to give oil companies a faster Payout. One company received a 50-50 split on production with no tax or royalty on its share.

Bengharsa said, "Many countries with less impressive oil statistics have offered less advantageous contractual terms.

"This can only mean that it is the current regime's policy to gain the support of foreign governments (mainly European) by luring their national oil companies into large investments in Libya."

He said to manipulate Europeans, the Libyan government's Oil Investments International Co. (Oilinvest) has bought a majority interest in several refineries on the continent and now controls 300,000 b/d of capacity and about 3,300 service stations.

He said Libya's goal is to develop downstream outlets in Europe for 400,000-450,000 b/d of crude.

STABILITY ISSUE

Bengharsa observed Libya has not been successful with its LNG exports because the long term nature of those 20 year contracts places a premium on stability.

"The current Libyan government is not viewed as the most stable and reliable," he said. "In addition, the regime is suffering from a lack of good people with the necessary skills to maintain these delicate international agreements. So LNG buyers will purchase only negligible amounts from Libya, for the purpose of diversification of sources.

"Of course, this illustrates the interesting point that Europeans support Libya from a short term oil perspective but become quite realistic from a long term gas perspective."