Lifting of Sanctions in Libya May Give a Boost to the Energy Industry
January 4, 2012
On December 16, 2011, the White House announced the U.S. has rolled back most of its sanctions on the Government of Libya. Specifically, the U.S. unfroze all government and Central Bank of Libya funds within U.S. jurisdiction, with limited exceptions – namely, assets pertaining to the Qadhafi family and former Qadhafi regime members. In coordination with the U.S., the United Nations Security Council also lifted sanctions on the Central Bank and the Libyan Foreign Bank on the same day. Additionally, UK Foreign Secretary William Hague stated that Britain is currently working to release about $10.2 billion in frozen Libyan assets.
The move by the U.S. freed up more than $30 billion in assets held frozen since February 25, 2011, when President Obama signed Executive Order 13566 in response to the violence that arose in Libya under the government of Colonel Muammar Qadhafi. The Department of the Treasury’s Office of Foreign Assets Control subsequently issued a set of regulations to implement the Executive Order (76 Fed. Reg. 38562, July 1, 2011). The United Nations lifted sanctions imposed by U.N. Security Council resolutions 1970 and 1973 in an effort to halt the violence in Libya. Mr. Hague noted that the move “means that Libya’s government will now have full access to the significant funds needed to help rebuild the country.” The release of frozen Libyan assets also promises to facilitate the resumption of oil exploration and production in Libya. This means greater prospects for foreign investment in Libya, which sits on Africa’s largest oil reserves, and greater opportunity for the energy industry.
The lifting of sanctions could not have been more timely for Libya and energy companies. According to a recent Bloomberg report, the transitional government in Libya seeks to raise output beyond pre-revolution levels by attracting international oil companies to Libya. The report mentioned that at the recent World Petroleum Congress held in Doha, Qatar, Europe’s biggest oil companies, BP and Shell stated they aim to resume exploration in Libya, while French oil company, Total SA, seeks to develop new production in Libya after restoring output at fields that were shut down. Other companies that were already producing in Libya are now boosting their production levels, such as Houston-based ConocoPhillips, Spain’s Repsol YPF SA, and Italy’s Eni SpA. According to executives from BP, Shell, and ExxonMobil, international oil companies need access to new crude and natural gas deposits to meet the growing global demand. With the release of sanctions, Libya now has access to its funds to help in its negotiations with foreign companies as it seeks to rebuild its economy. Energy and oilfield service companies from Houston to Europe are likely to benefit from the resulting increased economic activity in the African nation.
Specifically, having fewer restrictions on dealings with Libya will likely create more opportunities for Houston’s energy industry as local companies engage in further business transactions, form international partnerships, and enter into contracts to provide much needed services overseas.