Libyan oil is a stumbling block
Muammar Gaddafi, despite today's events in Libya, was and remains an extraordinary man, and for many his behavior remained secret. Many called him unpredictable, impulsive and inconsistent. Back in the distant 1986 year, Ronald Reagan, being the president of the United States, called Gaddafi a "mad dog of the Middle East." That year, the United States made the first attempt to remove the Libyan leader from power. The sixth fleet was sent to the coast of Libya, whose main task was the destruction of Gaddafi. But despite the fact that Gaddafi was an outcast in the eyes of Western politicians, he managed to bring Libya into the number of advanced oil-exporting countries. In 1986, a tough oil embargo was imposed against Libya, and the main paradox is that it was American companies that took the lion's share in exports of Libyan oil.
Of course, Gaddafi behaved prudently in business relations related to the oil sector, which cannot be said about his initiatives in domestic and foreign policy relations, probably because he was much less involved in them. Various international oil companies later learned to work — and make a fair amount of money — in an unstable and possibly hostile climate for doing business in Libya.
In 1951, Libya became an independent state as a result of the unequal alliance of British imperialism with the reactionary Saharan Muslim order of Senusius, whose leader became the monarch of Libya. For a long time, Libya was known as an “empty kingdom” and was a poor country, as it had scrap metal as its only export, which people collected on the battlefields of World War II.
Investigations by Italian geologists in 1930, which were later continued by experts of the American Army, indicated that oil could be found in the territory of this state. The Law on Oil adopted in 1955 in Libya broke with the usual practice of Middle Eastern countries, which granted a concession to a single company. Instead, Libya has allocated many concessions, limited only by geographic location and a limited duration of five years. Despite the criticism of the decision, from the moment the rich oil fields were discovered, it became clear how wise these decisions were.
10 companies took part in the initial oil rush, and for the first time oil was sent to 1961 from a terminal in Marsa-Brega. During the first five years, oil production in Libya exceeded a record million barrels per day; 19 companies were operating in the state, including ENI, Exxon, Shell, and BP; By 1968, their year was 39. This new model of granting oil concessions over time has spread around the world.
During the coup in 1969, Gaddafi seized power and was determined to get a higher price for his oil. Gaddafi and the Revolutionary Governing Council supporting him were determined to make the country rich. Libya acted thoughtfully when the soldiers of the Iranian Shah in December 1971 occupied the islands of Tunb and Abu Musa in the Persian Gulf just before British military units were withdrawn from the region. The main purpose of the conquest of the islands was the punishment of Britain for allowing the Libyan government to nationalize the assets of BP. The pretext was chosen extremely unconvincing, but the stakes were very high: BP owned a significant part of the Sarir deposit, which was the largest in Libya. After a truly fierce legal battle, acts of agreement were signed to restore full control of the Libyan government over the field. And in the future, each confrontation ended with the same result: foreign specialists were subjected to brutal persecution, work on oil platforms slowed down and this had an extremely negative impact on productivity. Texaco, Gulf, Philips, Amoco, Socal and many other companies abandoned the developed fields and left Libya. The National Oil Company of Libya, which was created on the model of the United States, had no problems acquiring the developed fields, and literally in ten years, state revenues increased fourfold. In 1979, per capita accounted for 10000 dollars.
The main problem of Libya was politics. In 1979, the US State Department provided its first list of countries sponsoring terrorism, and Libya played a prominent role in it because of its support for radical Palestinian groups. The US soon recalled the embassy from Tripoli and banned its citizens from buying Libyan oil. Seven years later, in June 1986, all trade with the Libyan Jamahiriya was declared illegal. When 21 of December 1988 of the year over the city of Lockerbie exploded a plane belonging to the airline Pan Am, and was attacked by a flight of the French UTA 772 in November of 1989, severe international sanctions were imposed against the state, which greatly affected the oil industry.
Despite the fact that the Libyan NOC relatively easily found new markets in Europe, Turkey and Brazil, as a replacement for lost retail outlets in the USA, but the embargo put an end to its plans to develop oil exploration and production of natural gas, production of oil products; these large-scale plans were postponed due to the lack of not only Western capital, but also equipment, technologies, and knowledge. The period from 1992 to 1999 was difficult: per capita income fell by 20%, economic growth slowed to 0,8% per year. Dissatisfaction grew, which resulted in uprisings in eastern Libya and several attempts to overthrow the ruling regime. Gaddafi had no choice but to give in. He extradited Libyan intelligence agents to the United Kingdom, who were accused of bombing Lockerbie, and paid rich compensation to the families of 270 victims. After the September 11 attacks in the United States, Libya supported the “war on terror” declared by the Americans. In 2003, a few days after Tanks US entered Baghdad, Gaddafi publicly announced the abandonment of any plans to develop nuclear weapon.
Already 13 November 2003, it became known that international sanctions were lifted in full, and the Libyan oil industry returned to life. Gaddafi planned to quickly double production to 3 million barrels per day and make Libya a truly influential member of OPEC, the organization that sets the price of oil. In 2004, the NOC put up for auction 15 licenses for the right to conduct oil exploration, thereby giving a new start to the oil rush.
Interest was expressed by 120 companies, including several British and American oil giants, who left Libya in 1986 year without being nationalized. The strategy of Muammar Gaddafi again was to prefer American companies in relation to European ones. International oil companies were expecting to return to Libya, despite the fact that contracts were extremely tough: 133 million dollars must be paid upon signing, and more than 300 million dollars must be spent on oil exploration. In return for such significant investments, the companies received 38,9% of production, but this is at best, but rather only 10,8%.
But if the terms of the contracts are so tough, then how can we explain the passionate desire of all oil companies to take part in the development and production of Libyan oil? Crude oil in Libya is the best in its quality in the world, and its fields are close and conveniently located to European refineries. Libyan oil currently accounts for about 15% of France's consumption and slightly less than 10% in the entire European Union. The search for oil is a costly and risky business, so you need to have not only huge funds, but also technical knowledge and experience. Most national companies do not. Much of the money they earn is used in a different direction, for other things and the scope of their activities is limited to the borders of their countries. So, despite the revolution and nationalization, the future reestablishment of ties is inevitable and regardless of whether it is in power — Gaddafi or the rebels.
Information