Libya seen saving best prizes for the U.S.
By Andrew Callus
LONDON (Reuters) - British companies have secured an important toe-hold in Libya, seizing on improved relations to line up deals in energy and aviation, but the juiciest prizes in the oil-rich country are likely to go to U.S. firms
To Libyan leader Muammar Gaddafi, whose country's most coveted asset is its oil and gas, the U.S. dollar speaks much louder than the British pound, oil industry and political experts said.
"Gaddafi knows the only game in town is Washington, so there'll be a big slice of Libyan oil for the Americans," said Fred Halliday of the London School of Economics.
Halliday, who took part in a 2002 delegation to Tripoli sponsored by British foreign office, said there was plenty of oil, gas and other business for Western firms.
But he added: "The United States is the power in the world, the only power with the ability to actually overthrow him, and the only power that might just achieve some of the things Gaddafi wants to see happen."
British Prime Minister Tony Blair shook hands with the West's old foe in Tripoli Thursday. In doing so, he began to usher Libya, until now the preserve of a few continental European oil industry investors, into the arms of London-listed Royal Dutch/Shell and BAE Systems .
His visit, the first by a British leader since 1943, was marked by an oil and gas partnership signed by Shell and Libya's state oil firm, some 30 years after the Anglo-Dutch group last produced on Libyan soil.
It also came as Britain's main defense and aerospace contractor BAE Systems confirmed talks for deals that could see the firm winning lucrative Libyan airport upgrades and commercial aircraft sales.
Britain cut ties with Tripoli after policewoman Yvonne Fletcher was shot dead outside Libya's London embassy in 1984.
BAE has courted Libya for years since then. But because of U.S. sanctions and fear of upsetting Washington, talks have been heavy going. A political source said Thursday the firm had made better progress since Libya announced in December it would scrap efforts to acquire weapons of mass destruction.
That announcement also paved the way for Blair's visit.
Shell was a key player in Libya until its assets were nationalized in the 1970s. But apart from a failed exploration foray there in the late 1980s, it has not been back since.
DOLLAR LUBRICANT
For Libya, its deal with Shell is part of an attempt to repair a business infrastructure that has seized up without the lubricant of U.S. dollars.
Energy analysts Market Intelligence Service said Gaddafi wanted to boost oil and gas revenues to strengthen his political power base at home and use business links with the West to improve Libya's standing abroad.
According to data gathered by British oil firm BP, Libya has about three percent of world oil reserves and one percent of its natural gas, though analysts say this only reflects a lack of serious exploration for decades and they may be far larger.
Tripoli has said it wants to attract up to $30 billion of investment to boost oil production capacity, which was less than two percent of world supply in 2002.
In comments to reporters Thursday, foreign minister Mohamed Abderrhmane Chalgam made it clear that Libya would not allow any one company to get control of its key resource.
He said he had over 180 contracts to hand out and that the bidding process would be open. "We want to rehabilitate our oilfields and upgrade the facilities," he said. "Shell is very important but it is open to competition."
He said Tripoli had also been talking to potential partners in the United States, including the president of Occidental, which recently opened up an office in Tripoli.
A group of other U.S. firms called Oasis is also keen to renew contracts on Libyan oil and gas fields, dormant since U.S. sanctions isolated the nation in the 1980s. These contracts are set to expire next year.
Smaller European groups, including Italy's ENI, have a head start on Shell and its biggest rivals, Exxon Mobil Corp and BP Plc. ENI is Libya's largest foreign producer with 14 percent of its output, while Total of France and Spain's Repsol have multibillion dollar projects under way too.
Shell's head of exploration and production, Malcolm Brinded, said Shell's small initial $250 million investment could grow into something far bigger as nearby Europe turns to shipped-in liquefied natural gas, LNG, to meet rising demand.
"The global LNG industry will double in the next decade and Libya will play an important part," he said.
03/25/04 10:49 ET
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