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Title: With Sanctions Lifted, Big Oil Lines Up to Do Business with Libya's Qaddafi , Sunday Business (United Kingdom), Jun 20, 2004
Database: Newspaper Source
Older members of the Libyan elite like Ghanem and El-Badri also have warm memories of the US because they studied there in pre-embargo days. The sanctions only intensified the nostalgia, so talking to these technocrats about the US can have a Rip Van Winkle quality.
"Ask me what my favourite TV show is," says Khalid Jarnaz, who lived in the US in the early 1980s and now works in Tripoli for Repsol, the Spanish oil giant. He answers his own question: "I love M*A*S*H. My favourite comedian is Bill Cosby."
Within Libyan companies, the fondness extends to US business habits. "We follow the same practices as Esso because that's what we know," says Sirte executive MS Abulaiha. "Anything else would be unfamiliar."
At Sirte's Zilten oilfield, 105 miles south of Brega, the electric current runs according to American settings, not those of Europe or the Middle East. Zilten is Libya's oldest commercial field. Esso geologists made the initial discoveries here in the mid-1950s, and people like field maintenance supervisor Mohammed Shubani are hungry for new equipment. But he wants it to come from the US.
"I want GE parts," he says, pointing to the GE gas turbines that power the pumps and rigs. "The standard here is American and the machines will be so much easier to maintain."
Like members of a South Pacific cargo cult, Libya's oil technocrats venerate the ways of the long-vanished Yankees. The red and blue logo of Zueitina Oil, which used to be operated by Occidental, is identical to that of its former American parent except for the Arabic letters that spell out Zueitina.
"We just changed the name---we left the rest as it is," says Zueitina field superintendent Mohammed Saad.
Saad worked for Oxy from 1975 until it left in 1986; he now runs Concession 103, the oilfield that was the backbone of Oxy's Libyan operations. In the pumping stations around 103, in the heart of the Libyan desert, old Occidental manuals sit alongside newer guides. Saad proudly notes that the tanks are still painted the lime tones he calls "Oxy green".
Saad may be fiercely critical of President Bush's policies on Iraq and Israel, but when it comes to Oxy, he still sounds as if he were on the payroll.
"This is where Oxy was born," he says. "When Oxy returns to 103, I'll turn it over to them and retire."
The first sign of the El-Sharara field in the heart of the Sahara is the ghostly glow cast across the desert sands by two natural gas flares. It doesn't yet pay to ship the gas north, so it's simply burned off, substituting day for night near many wellheads.
Located about 500 miles south of Tripoli, El-Sharara is one of Libya's newest oilfields. It is operated by Spain's Repsol, which, along with France's Total, and OMV of Austria, controls 25 percent of production. Libya's National Oil owns the rest.
In the eight years since pumping started, the oilfield has proved a wise investment. Roughly 200,000 barrels of oil flow out of the ground every day at El-Sharara. The nearby Elephant field operated by Italy's Eni and Libya's National Oil should generate another 150,000 a day by 2007.
European oil companies were able to take the lead because Washington's sanctions were more severe than the UN's during the 1990s. While sales of military hardware were banned and direct air service was almost impossible, the UN didn't prohibit foreign companies from dealing with Qaddafi. So firms like Repsol and Total were able to develop new fields with little difficulty.
Before UN sanctions were suspended in 1999, European managers would simply fly into Tunisia, then proceed overland to Tripoli or to the desert oilfields. Back when the Americans were in Libya, El-Sharara and the surrounding Murzuq basin were terra incognita.
Now, says a Repsol manager at El-Sharara, "the future of oil in Libya is in this area". Across the trackless desert, drilling rigs operate day and night despite temperatures that by early June were already hitting 100 degrees.
While it may not be pleasant for the Libyans and the expats who man the rigs, working around the clock pays off. The oil reservoirs in this area are located a comparatively shallow 5,000 ft below the surface and the crude flows abundantly. That keeps production costs down to just a few dollars per barrel compared with $5 to $10 in Texas or the North Sea. With crude selling at about $38 a barrel, El-Sharara is proving to be a gusher for National Oil and its European partners.
So while Oxy and Oasis negotiate with the Libyans about their old concessions, it's the unexplored parts of the country that have both American and international oil giants salivating.
This summer National Oil plans to auction 10 new blocks for exploration. The American companies with roots in Libya hope they have an advantage, but they're up against some deep-pocketed international rivals, including Total, Repsol, and Norway's Statoil.
"It's been a long time since you've had blocks like this come on to the international market," says Matthew Simmons, a veteran Houston energy banker who visited Tripoli in early June. "Libya was a company maker for Occidental, Amerada Hess Marathon and Conoco, so anyone would be crazy not to look at these blocks."
Still, there are some big risks. First, it will take a decade of seismic work and analysis to determine just how much new oil lies under the desert sands, says Simmons. Then there's the question of how genuine a conversion Qaddafi has made.
While Libya has received praise from the US for its co-operation with weapons inspectors, Qaddafi's past support for Palestinian terrorist groups and the IRA is troubling.
And new reports have surfaced that Libya's intelligence service may have plotted to assassinate the Crown Prince of Saudi Arabia. Also unknown is whether the mercurial Qaddafi will decide that foreign oilmen aren't entitled to make the kind of profits that usually come with high-risk projects.
Indeed, Qaddafi was among the first Arab leaders to demand better deals from foreign oil giants and to nationalise fields.
For European companies that have been operating in Libya and have dealt with Qaddafi, these issues don't loom so large.
"People believe Libya is totally wild, but they are mistaken," says Helmut Langanger, who heads up exploration and production for Austria's OMV. "We've been there since 1983 and it's a very good country to do business in. Sun or rain, the Libyans honoured their agreements."
Georg Wachtel, the general manager of OMV's Libyan operations, has been in and out of the country since 1985 and says that unlike in Saudi Arabia, "living here is very safe. You're not forced to have a driver or security to move around, and you can travel freely."
So while the Americans weigh their return to Libya, European companies have been moving aggressively. Italy's Eni is months away from switching on a $1 billion pipeline between Libya and Sicily that will substantially increase Libya's gas exports.
And in March, Royal Dutch/Shell signed a $200 million agreement to explore for oil and develop liquid natural gas facilities with National Oil. Offshore blocks are also drawing interest, with France's Total pumping 20,000 barrels a day in the Mediterranean near Tunisia, while Repsol and OMV focus on prospects further east.
Although El-Badri happily welcomes American visitors to his Tripoli office, the reunion of Big Oil and the regime of Colonel Qaddafi is far from assured. No administration in Washington is likely to countenance US companies spending billions in Libya if Qaddafi returns to his old wayseven if European competitors are willing. Nor is it clear just how flexible Libya will be about the terms of the new contracts.
Still, as he sits in a 15th-floor Corinthia Hotel conference room overlooking the Mediterranean, Occidental's Irani seems unfazed by these worries. "We assume the rapprochement between the US and Libya will continue," he says. "Otherwise, I wouldn't be visiting this frequently."