CAIRO: Call it, if you will, classic Moammar Qaddafi. The Libyan leader s mention of the possibility of nationalizing the oil sector in response to current low oil prices is merely his unique way of calling attention to the difficulties producers face because of the global economic meltdown, some analysts say. The comments - during a televised address he gave on Wednesday to students at Georgetown University in Washington - are also unlikely to deter oil companies from pursuing new opportunities in Libya, which is rapidly beginning to flex its muscles after decades long US sanctions were lifted in 2004. Qaddafi never expresses his thoughts in a conventional manner, Saad Djebbar, a Libya expert and deputy director of the North African Institute at Britain s Cambridge University, said Thursday. I believe that what he meant was ... to warn of the effect of low oil prices on countries which depend almost entirely on oil revenues. Companies are unlikely to seriously step back from investing in the country, despite his comments. Companies are not fools, Djebbar said. They know how to read and analyze the statements. In his speech Wednesday, Qaddafi, said that oil exporting countries may look to nationalization because of the rapidly declining prices. He added that at the current low prices, we may refuse to sell it (oil). The remarks come after recent reports in the state-run media urging Libya s top legislative and executive bodies, the Basic People s Congresses, to vote to nationalize oil companies. Like other members of the Organization of the Petroleum Exporting Countries, Libya has viewed the months-long plunge in oil prices with alarm. Three OPEC production quotas since September, most recently a 2.2 million barrel per day output cut that went into effect Jan. 1, have failed to halt a slide that has left crude about 70 percent below mid-July levels of nearly $150 per barrel. As part of that cut, Libya asked oil companies operating in the North African nation to cut production by 270,000 barrels per day from September levels. The reductions were to take effect at the beginning of January. I think the nationalization talk is a red herring, said Ben Cahill, who manages the Petroleum Risk Service for Washington-based consultancy PFC Energy. What I think is a real issue is how the Libyan economy will be affected. Cahill said that Libya, over the past few years, has re-negotiated a number of exploration contracts with foreign firms valued at about $22 billion over the next 10 years. Libya shoulders a 50 percent share of that financial burden. I think there s a real concern by the Libyan government about funding these projects at low oil prices, he said, adding that those are the kinds of projects where you could see hesitance on the part of the government. It is unlikely that oil majors, who were clamoring to get into Libya when the country was still under US sanctions following the 1988 bombing of PanAm flight 103 over Lockerbie, Scotland, would be too eager to cut and run at a time when Libya is actively courting new investments. We have a good working relationship with the government of Libya, said Andrea Ranson, a spokeswoman for Calgary, Canada-based Petro-Canada. We signed a bunch of new contracts last summer and we re working on implementing them right now. The Canadian company s deal with Libyan National Oil Corp. contemplates total spending of $7 billion, with 50 per cent of all development costs to be paid by Petro-Canada, which will receive an initial 12 per cent share of production. The company produces about 90,000 barrels per day in the country. The company is one of several major international firms, including Royal Dutch Shell, Spain s Repsol and American firms ConocoPhillips, Marathon Oil and Occidental Petroleum that have operations in Libya. Asked if Libya had made any moves or notification of plans to nationalize, Ranson said: We have had no formal notification. In Madrid, Repsol spokesman Kristian Rix said the company had also received no formal notification from Libya and does not believe there is a real possibility of nationalization. Rix said Repsol believes Qaddafi was speaking in theoretical terms rather than stating a firm policy change, adding that the Spanish giant in July renewed its contracts to operate there through 2032. Repsol produces about 50,000 barrels a day in Libya, which accounts for about 5 percent of the company s total output, he said. Qaddafi is famous for off-the-cuff comments and actions that baffle, amuse and, at times, alarm. During one televised appearance in the late 1990s, at the high of the dispute over the handover of the suspects wanted for the Lockerbie bombing, he spent about 30 minutes swatting and shooing away a fly circling his head in the studio. He continued to speak while swatting. And, at an independence day rally in 1997, he commented that some European countries would like to re-colonize Libya because it has sand and sun, two things lacking in abundance in Europe. At the Georgetown speech, he again raised the possibility of a one-state solution for the Israeli-Palestinian dispute - a joint state called Israeltine. Never take Qaddafi s statements at face value, said Djebbar. That s his way. He s unique, unconventional. In the case of his oil comments, Qaddafi made the point that with oil prices squeezed by slumping demand and the global economic meltdown, nationalizing the sector would give the producer countries greater control over production and, by extension, price. He complained that the country had contracted for billions of dollars worth of projects, largely on the back of the rally in oil prices earlier last year. The problem is similar to that confronting other OPEC members, particularly in the Middle East. Project delays are being announced with increasing frequency in the Gulf Arab countries and equity markets there have taken a pounding. Economic growth figures in the Middle East are consistently being revised downward. In Libya, although the country is sitting on foreign currency reserves of about $120 billion, there s still quite a bit of concern about sustained low oil prices and what that means for the budget, said Cahill. The Libyan sovereign wealth fund that recently completed its first year of operation lost about $3 billion, said Cahill. That s a symptom of the concern in the government about ... unwise investments. Even so, Libya remains in a better position than some other OPEC members, like Iran and Venezuela. Djebbar said the country, with its small population, is used to lean times because of the sanctions. Libyans learned how to survive during the sanctions on the least of means, he said. I think they are now living very comfortably on the available means, considering the revenues from when oil was at about $150. -Associated Press Writer Rob Gillies in Toronto, Canada, and Daniel Woolls in Madrid, Spain, contributed to this report.
