Libyas decision to give up its programs to develop weapons of mass
destruction make it an area of interest for foreign investment and a major
competitor for Iraqs oil industry, says Gal Luft, co-director of
the Institute for the Analysis of Global Security in Washington, D.C.
Foreign companies are rushing to get into the country because Libya
has better oil that is easier to produce, in addition to being much
more politically stable and safe, Luft says.
In September 2003, the United Nations, which had imposed sanctions on
Libya in 1992 following the 1988 Pan Am bombing over Lockerbie, Scotland,
lifted the sanctions in response to Libyas cooperation regarding
the case. Then in December 2003, after Libya announced the end of its
weapons program, the United States began lifting its own sanctions against
the nation. Since then, and with the recent release of previously frozen
bank assets, U.S. companies have begun negotiating with the Libyan government
for oil exploration and production contracts.
Libya holds 36 billion barrels of crude oil in proven reserves, according
to figures from the Energy Information Administration (EIA), and is still
largely unexplored. Analysts suggest the potential is excellent for large
undiscovered reserves. In addition to being close to major European markets
and having a well-developed oil infrastructure, Libyas oil is high-quality,
low-sulfur sweet crude oil, which takes less refining and
thus is much cheaper to produce; it is the preferred oil for gasoline,
according to EIA.
To entice foreign companies back into the country, the Libyan National
Oil Corporation recently solicited bids on 15 blocks of land for exploration
and production of oil and natural gas; the winning bids will be announced
in January, according to the corporations Web site. The New York
Times reported on Oct. 18 that the corporation had received bids from
120 different companies.
Still, a couple of barriers remain to open U.S. involvement in Libya,
says Lori Feathers, an attorney with Haynes and Boone, LLP, in Houston,
Texas. American companies can travel to, sign contracts with and work
in Libya, but because the country is on the list of states that sponsor
terrorism, there are export controls, she says. Thus, many high-tech goods
that companies would export for use in or sale to Libya cannot be exported
without a license from the U.S. Department of Commerce. In addition, Feathers
says, Libya still has some regulations in place that are contrary to U.S.
laws, including promises to abide by a boycott of Israel by a consortium
of Arab states. Officials at the newly formed American embassy in Tripoli
are trying to work out this and other issues with the Libyan government,
she says, but it will likely take some time.
Libya is looking for $30 billion in foreign investment by 2010, hoping
to increase its daily oil production to at least 3 million barrels per
day. In October, the nation was producing more than 1.5 million barrels
per day, with hopes of reaching 2 million barrels per day this month.
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