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Thesis & Antithesis

A critical perspective on energy, international politics & current affairs

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Location: Washington, D.C.

greekdefaultwatch@gmail.com Natural gas consultant by day, blogger on the Greek economy by night. Trained as an economist and political scientist. I believe in common sense and in data, and my aim is to offer insight written in language that is clear and convincing.

31 July 2005

Oxy returns to Libya

On July 29, Occidental Petroleum Corporation (NYSE: Oxy) announced that it was resuming operations in Libya—operations that had been interrupted in 1986 when Ronald Reagan imposed comprehensive sanctions on Tripoli, banning American corporations from doing business in the country. According to the company’s press release, the resumption of operations in Libya will add about 12,000 to 15,000 bpd to the company’s production (in 2004, the company’s average worldwide production was 566,000 bpd). This change is unlikely to have an immediate effect on world markets, though Libya’s reintegration in global markets could prove significant. The Libya National Oil Corporation (which was exploiting Oxy’s wells in the country in the period since 1986) has 22.7bn barrels of oil in reserves (2003 est.), while the Oil and Gas Journal estimates Libya’s proven oil reserves at 39bn barrels; in 2004, daily production was estimated at 1.6m bpd (1).

At the same time, Libya remains, according to Wood Mackenzie Consultants, “highly unexplored” and has “excellent” potential for more oil discoveries. Libya’s own targets are set for 2m bpd in the 2008-2010 period and 3m bpd in 2015; to achieve that, Libya is seeking up to $30bn in foreign investment. For Libya, oil earnings form 95% of its hard currency earnings and 75% of government receipts ($18.1bn in 2004 from net oil export revenues), showing how important a healthy oil sector is for the country’s economy. Meanwhile, in June 2003, Colonel Qadhafi announced his plans to bring Libya to the WTO and appointed Shukri Muhammad Ghanem, a proponent of privatization, as Prime Minister; in October 2003, the prime minister published a list of 361 companies to be privatized (1).

It should be obvious that Libya is making serious efforts to rejoin the international community. The decision to accept responsibility for the Lockerbie bombing and its declaration that it has forgone pursuit of weapons of mass destruction are welcome developments. Add to that the resumption of operation by one of America’s main oil firms in the country, and the path to reintegration looks rosy. Which goes to show firstly how important it is for a country to make a strategic decision to rejoin the international community, and secondly how much it matters for the outside world to quickly step in and pick up the reconstruction pieces. It’s not far fetched to think that Libya is slowing proving a model of how a recalcitrant country can be reintegrated into the world.

References:
(1) “Country Analysis Briefs: Libya,” Energy Information Administration, Department of Energy, (link)

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