What's New in Libya
Most of the world’s economy is becoming steadily more dependent on freely available imported oil. The critical need for this dwindling commodity has focused government policy in major importing economies such as China, USA and the EU on preserving regional stability. Some third world governments are moving toward an enlightened cooperation with the first world which may lead to impressive benefits to all.
Nowhere in the world is the turnaround from ideology to cooperation more dramatic than Libya. In 1986, President Ronald Reagan called Gaddafi the "mad dog of the Middle East." Days later, U.S. airstrikes barely missed the Libyan leader in retaliation for a Libyan sponsored bombing at a Berlin nightclub targeting American soldiers.
Libya has Africa's largest oil reserves. For nearly twenty years its oil and gas have sat largely untouched in part because western governments' banished Libya for state sponsorship of terrorist activities and the pursuit of nuclear weapons.
In 2003 Libya shut down its nuclear program. Gaddafi now opposes the al-Qaeda brand of Wahhabist fundamentalism that Saudi Arabia sponsors. Gaddafi, Leader and Guide of the Revolution, is starting a stock exchange and a $255 billion sovereign investment fund. For good measure Gaddafi now allows satellite dishes and surfs the internet.
Libya has vital sulfur-free gas and oil resources that are cheap to extract. It could become the fourth largest oil-producing country within OPEC, after Saudi Arabia, Iraq, and Kuwait. Proven oil reserves are estimated to be 36 billion barrels with only 30% of the country having been explored for oil reserves.
Foreign investment is rushing into Libya following the lifting of international sanctions. The Libyan National Oil Corporation just auctioned off exploration blocks in the country's Ghadames and Sirte Basins to a worldwide list of major national and privately-run oil and gas companies. International oil companies such as Petro-Canada, Gazprom (Russia), Algeria's Sonatrach, Royal Dutch Shell, Marathon (USA), Eni (Italy), Repsol (Spain), OMV (Austria), Woodside (Australia) and Hellenic (Greece). This creates a worldwide constituency interested in Libya’s economic success.
Libya is a member of the Organization of the Petroleum Exporting Countries (OPEC) and can produce only as much oil as the as permitted by the cartel. Ben Shatwan, the Secretary of General People’s Committee for Energy (GPCE), hopes to convince the cartel that Libya should be able to resume its historical production capacity of 3.3 million bpd.
One new project is Eni’s $5.6 billion West Libya gas pipeline. Libya is located on Africa’s north coast which is close to Europe. This project will connect the large gas processing plant at coastal Mellitah to Sicily, the first direct gas link from Libya to Europe. “At full capacity, this project will be producing 10 billion cubic meters of gas per year, 80% of which will be exported to Europe,” says Mr. Ben Shatwan.
A few decades ago, Libya would be considered a remote, backwater uninteresting to the political establishment in a thriving first world economy. But with a largely untapped vast oil reserve, both Libya and the major world powers are learning to cooperate in a way that was unthinkable just a few years ago.
About The Author:
William Cavalier represents King Royalty Corporation to the broker-dealer and institutional markets. He has been in the investment business since 1979 serving as a hedge fund manager, registered investment advisor and member of the Chicago Mercantile Exchange. www.kingroyalty.com
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