Libya's pledge to dismantle its programme to develop
weapons of mass destruction (WMD) could pave the way
for the return of US oil companies that left the North
African country in 1986 when then President Ronald
Reagan imposed sanctions on the country.
The US is expected to lift the Libyan portion of the
Iran-Libya Sanctions Act next year. However, this may
not occur until after the presidential elections in
November. The United Nations lifted sanctions against
the regime of Muammer Gadaffi in September.
JJ Traynor, an oil analyst at Deutsche Bank, said
talks between Libya and US oil companies could start
early in the new year.
Libya has oil reserves of 40,000m barrels, about
one-eighth of the oil reserves of Saudi Arabia, the
largest producer in the world.
Mr Traynor said the companies most likely to seek a
return to Libya are ConocoPhilips, Marathon Oil and
Amerada Hess, partners in the Oasis group in Libya.
Oasis, one of the first foreign-owned companies in the
oil rich country when it was opened up for oil
exploration in 1955, produced about 400,000 barrels of
oil a day from fields with more than 1bn barrels of
oil reserves before it quit Libya.
He said Occidental Petroleum, a US oil company, would
also be interested in returning to Libya. Occidental
entered Libya in 1966 and was producing 70,000 barrels
a day from a 250m-barrel field before it left.
"There could be complications if the negotiations
steer towards compensation for the loss of oil revenue
during the period of sanctions," said Mr Traynor.
Abdullah al-Badri, the former head of the state-owned
National Oil Corporation, has said that if US
companies want to return to Libya, they will return to
the fields they used to operate in the country.
Mr Traynor said Exxon-Mobil may even return to Libya.
The two predecessors of the world's largest listed oil
company both quit Libya in 1982, following a US trade
embargo started in the previous year.
European oil companies have remained active in Libya
during the absence of their US peers. They include ENI
of Italy, Total of France and Repsol of Spain.
Libya is trying to woo international oil companies as
its seeks $30bn of investment in its energy sector.
It hopes to increase oil production from 1.3m barrels
a day to 3m by 2010. However, its oil target is still
short of the 3.5m barrels a day it produced in 1970.
Oil export revenues account for about 95 per cent of
Libya's hard currency earnings. Libya's oil refinery
capacity, its gas reserves, and liquefied natural gas
(LNG) industries have all suffered from
underinvestment due to the economic sanctions, which
included a ban on importing refining equipment.
"If they are serious about LNG, we could see Royal
Dutch/Shell Group appear on the scene," Mr Traynor
said. He added that Libya had seen its neighbours
Egypt and Algeria develop their LNG capacity in a
market forecast to grow substantially over the next 20
years. United Nations inspectors gave Libya high marks
on Monday for working with them as they began checking
if it had really renounced its nuclear ambitions,
agencies report from Tripoli.
Libya's nuclear programme was at a very early stage,
Mohammmed ElBaradei, the head of the International
Atomic Energy Agency, said after touring four atomic
sites. "We haven't seen any enriched uranium," he
added, referring to the essential material for a
He headed a team of inspectors invited to see how far
Libya had progressed in developing a bomb.