Sunday, August 26, 2012

Capitalist Firms Still Reluctant to Invest Large Sums in Occupied Libya

Libya’s promised reconstruction bonanza fails to materialise

A year after Gaddafi was overthrown, British businesses are not returning

Published: 18:45 August 26, 2012

Tripoli: Regatta is a large gated compound set aside for foreign business executives on the coast west of Tripoli. Most of its homes lie empty, many ransacked by militias, and sand blown in from the seafront forms little dunes on its roads. It wasn’t meant to be like this.

It is now a year since the fall of Muammar Gaddafi’s government, which triggered seemingly endless predictions by the likes of UK defence secretary Philip Hammond that British executives would be “packing their suitcases” to share in a reconstruction bonanza. Yet Regatta stubbornly refuses to become anything but a ghost town if not a laboured symbol for the state of Libya’s business life.

“Nobody is coming back here: it’s not safe,” admits one of the compound’s few residents, a German engineer. Those foreign companies that are again operating skeleton staffs say their executives refuse to bring their families.

In April, the UK’s ambassador to Libya, Sir Dominic Asquith, addressed a delegation of the Libyan British Business Council (LBBC) in Tripoli. The trade body reported to members that he “spoke vehemently of his surprise and disappointment at British firms’ slow response to the business opportunities”.

Then in May, UK-listed oil giant Shell added to the sense of disengagement when it said it was abandoning its wells and stopping exploration in Libya. Meanwhile, pumps supplier Weir Group has so far refused to return to Libya it had been working on a multimillion-pound power plant refurbishment in Misrata. Oil services firm Wood Group, which last week revealed it had just received a payment of $5.8m (3.7m) from the new Libyan government for work performed for the previous regime, is also cautious: “The pattern to look at [to predict how Libya will develop] is Iraq. There was a great deal of discussion about the potential there, but it is only now that people are starting to get engaged.”

However, the LBBC is slightly more positive when addressing the wider world. Director general Robin Lamb insists British firms are keeping their end up: “Someone said ‘where are the Brits?’, but we’re not lagging behind. There are three branches of Next, branches of BHS, Topshop, MS”

Among other hopeful signs is the return of BP which announced a deal to explore for Libyan oil in 2007 only to withdraw during the Arab spring. “We are preparing to pick up our exploration programme where we left off in early 2011 and we’ve started assigning contracts,” says a spokesman. “It will take time to rebuild our capabilities and we don’t expect any drilling to start until next year.”

Elsewhere, Heritage Oil, a FTSE-250 prospector, has long-term permits and licences to supply the country’s oilfields after acquiring a 51% share in oil services group Sahara in October. “Sahara is active but so far has not generated any revenues,” the company says. “We are working on various tenders and have held discussions with senior members of government and state oil companies.”

Still, none of these projects currently looks like forming part of the bonanza envisaged 12 months ago. So why is the reconstruction taking so long?

Security remains a problem: two car bombs earlier this month in Tripoli set nerves on edge. Tribal fighting also continues in towns to the south, and western diplomatic missions have been attacked in Benghazi, Libya’s second city.

“A string of assassinations, mainly of individuals that turned against the Gaddafi government last year, and attacks on western targets have sent a worrying message,” says Jonathan Terry of risk consultancy Maplecroft. “Libyan officials have repeatedly said that companies from countries such as Britain, France and the US who supported the intervention would be ‘rewarded’, but the extent to which this promise will be upheld has yet to be seen.”

For many, the slow progress is down to westerners not understanding the pace at which Libya works. One seasoned middle-eastern oil executive says: “The [Libyan] National Transition Council was very careful not to say it was going to give any long-term contracts until after a democratically elected government was formed. There was never going to be this rush for contracts.”

Elections took place in July, and though they passed off lots of violence throughout the country, a new cabinet has yet to be formed. “It’s taken a while for the western-backed Libyan rebels to get organised,” says Maryann Maguire of UK-based consultancy InterCultures.

Nowhere illustrates the stagnation better than Tripoli’s stock market. In a country supposedly hungry for reconstruction, financial traders should be rushed off their feet. Instead, they spend their days staring at chains of orange zeroes on big wall-mounted screens.

Brokers say the government, staffed by officials of the former leadership, is not equipped to make the transition to a free market. Stock market trading director Mohammed Salabi has a series of bulky files containing a model regulatory law drafted by his own officials and drawing on experience in bourses in London, Paris and New York. Even now, he claims, the administration has made no move to implement his regulations which, he says, would give investors confidence to buy shares.

“The economics minister still does not understand the importance of the Libyan stock market,” he says. “We made the regulations We cook the food, we make the dish, we give the fork and the knife and ask him please, just eat it.”

Yet other foreign firms are beginning to tuck in. France’s Nexans was recently awarded an 80m electric cable contract, and Germany’s Wintershall has begun work on a major new oil pipeline. “France, Italy, Turkey and Germany have a completely different culture to doing business,” says InterCultures’ Maguire. “British business culture is more reserved.”

Some nationalities have definitely demonstrated more corporate aggression in Libya, though it remains to be seen how effective these strategies will be.

Hans Meier-Ewert of the German-African Business Association made his first visit during the war, flying in five tonnes of medical aid and a plane-load of executives while fighting still raged. “We want to be the early bird,” he says. “It’s not important to have the deals immediately; its important we go and see them.”

Apart from British reserve, other more tangible barriers to Britain’s business remain. A regular complaint from companies is the line taken by the Foreign and Commonwealth Office, which counsels against “all but essential travel” to Libya. This bumps up insurance costs and puts firms off making the trip.

Still, the LBBC’s Lamb is optimistic, arguing that the bonanza is delayed, not abandoned. He hopes the new government will speed reform: “Our own advice is that going to Libya for business purposes is now ‘essential’,” he says.

The sales pitch certainly sounds alluring. After 40 years of rapid economic development, a lot of which was destroyed by the U.S. and NATO in 2011, Libya’s six million people are hungry for everything from roads and hospitals to phones and fashion. The country has no railway and no public bus service. UK Trade and Investment estimates Libya will eventually spend more than 125bn on reconstruction.

“Libya is virgin land: any business coming here will be a success,” says Ehab Abdelo-Meged, manager of a branch of the US bakery chain Cinnabon the sole foreign-owned fast food franchise to open in Tripoli in 12 months. “Look at retail. All the guys here buy their clothes from aboard. Why would they go abroad if they could buy them here?”

If they could, no doubt they would. But sceptics wonder for how long fashion-conscious Libyans will have to literally embark on shopping trips, while others worry that the bloodshed may still have years to run. “Nothing will happen [commercially] until things settle down, and that could take years,” says one expert. “The Libyans are settling old scores and will probably go through further tribal battles, and possibly civil war.”

— Guardian News & Media Ltd

Updated August 26, 2012, 12:45 p.m. ET.

Libyan Congress Seeks Answers in Attacks on Shrines .

Wall Street Journal

Libya's newly elected congress held an emergency session on Sunday about the destruction over the weekend of two of the country's most revered Sufi shrines by suspected religious extremists, who some lawmakers allege may have undertaken their actions in collusion with security officials.

The brazen attacks in two cities underscore the shaky nature of the emerging democracy in Libya, where elected officials have little sway over security forces. The destruction has raised fears that conservative religious groups—whose candidates were soundly beaten in the country's July election—may attempt to sabotage Libya's transition to a secular, modern state.

At sunrise on Saturday, Libyan adherents of the rigid Salafi school of Islam brought bulldozers into the center of Tripoli and flattened the expansive, centuries-old Sidi Al-Sha'ab shrine. Uniformed members of at least two separate government security divisions that answer to the Interior Ministry barricaded the busy seafront road where the religious complex was located and allowed the daylong demolition to continue, according to witnesses.

That destruction followed vandalism Friday night at Libya's most revered Sufi mosque in Zlitan, west of the capital, and the burning of an adjoining library that housed hundreds of theological treatises dedicated to the mystical branch of Islam that historically has been practiced across much of North Africa.

Mohamed Almagariaf, head of Libya's new congress, denounced the violence as crimes against Islam, and demanded answers from the ministers of interior and defense as to why the buildings hadn't been protected by the forces under their command.

"These kinds of actions are unacceptable and condemned by our religion," Mr. Magariaf said in a televised statement. "What is truly regrettable and suspicious is that some of those who took part in these destruction activities are supposed to be of the security forces."

On Sunday evening, Interior Minister Fawzi Abdel A'al announced his resignation in an interview with Arabic news station Al Jazeera, saying he rejected the criticism leveled by lawmakers against his security forces. Mr. A'al told the network that his forces have done an excellent job keeping the nation safe from threats.

No one from the Interior Ministry appeared at Sunday's closed session of congress, despite demands from Mr. Magariaf for their attendance and a chorus of outraged speeches from numerous lawmakers, some of whom compared the weekend destruction to the desecration by the Taliban of Afghanistan's giant Buddha statues. An official from the Defense Ministry appeared, but it wasn't immediately clear what information he provided to the lawmakers.

Deputy Prime Minister Mustafa Abushagour said the defense and interior ministers failed to obey his order to protect the shrines. He said those who were responsible for the destruction "would be held accountable."

It remained unclear on Sunday whether an official investigation had been opened into the violence.

No official statement has been made since the congressional session ended.

Officials from the Interior Ministry didn't return calls seeking comment about the destruction or about allegations of collusion by members of the security forces with the suspected vandals.

Officials from the Defense Ministry didn't return calls seeking comment.

Religious parties, including those run by the Muslim Brotherhood and Salafi figures, were trounced in the polls held earlier this summer, which were won by a coalition of liberal political figures dedicated to a more tolerant and Western political system.

The group that won the largest bloc in congress, the Coalition of National Forces, has moved slowly in setting up a new government and has yet to name a cabinet, adding to the deep-seated sense of political malaise across the country.

The new congress doesn't have direct oversight of the myriad security forces that presently exist, and it is unclear how closely the security agencies follow the chain of command presented by the departing group of transitional ministers. The ministers have held their posts since December as part of an interim government.

Libyan Sufi scholars allege that the religious extremists have taken advantage of the power vacuum to violently impose their religious dictates on society. At least three other Sufi shrines have been vandalized in the last nine months, in addition to the two over the weekend.

Historically, most Libyans follow Sufi teachings. Salafis don't have widespread appeal or followers in Libya, and many Libyans see their Islamic teachings as a foreign import from the Arab Gulf countries.

When news of the bulldozing spread through the capital on Saturday morning, several Tripoli residents who live near the Sidi Al-Sha'ab shrine complex succeeded in breaking through the security cordon to try to intervene and stop the destruction.

These residents said the men organizing the demolition had Libyan accents and were wearing long white tunics and hats favored by Islamic theology students. The men described themselves as students, though they declined to identify themselves or the institution where they were studying, according to two residents.

The religious students told irate passersby that the shrine and adjoining mosque were places of "witchcraft," according to one resident who said he was later forcibly removed from the demolition site by security officials.

Three employees of Libyan private TV channel Al Assema were detained by Libyan security forces Saturday evening when the channel aired pictures of the forces who had surrounded the shrine complex and allowed the destruction to continue, the TV channel said. The journalists were released without charge after several hours, it said.

Tripoli's Al Sha'ab mosque and shrine housed close to 50 Sufi graves, including the tomb of Libyan Sufi scholar Abdullah al-Sha'ab, who died in the 16th century.

On Friday, attackers razed the revered resting place of Abdel Salam al-Asmar in Zlitan, about 160 kilometers, or 90 miles, west of the capital, and also set fire to the historic adjoining library.

A Facebook page titled "Together for the Removal of the Abdel Salam al-Asmar Shrine" congratulated the people responsible for the attacks for the "successful removal of the Asmar shrine, the largest sign of idolatry in Libya."

Write to Margaret Coker at

Why Libya's 'sweet' crude oil is not enough to tempt BP or Shell

Libya is now producing 1.5m barrels of high-quality oil a day. But with exploration by BP and Shell so far disappointing, British involvement in the country remains slow

Terry Macalister
The Observer, Saturday 25 August 2012

A decade ago Libya was at the centre of dramatic stories alleging cloak-and-dagger diplomacy between then-BP boss Lord Browne, Colonel Gaddafi and MI6 agents. And barely 12 months ago British warplanes were in action over Tripoli – this time fighting to topple the North African leader former prime minister Tony Blair had previously decided to embrace.

But if these two events were seen by critics as the UK manoeuvring for an "oil boom" that would benefit both countries and an energy-hungry Blighty economy, it must be deemed a bit of a failure.

Libya is indeed once again pumping out 1.5m barrels a day of very high-quality crude, a small amount of which is no doubt coming to UK refineries, but neither BP nor Shell is playing any role in that output.

In fact it is American, Italian and even German companies that have been brought in by the new government in Tripoli to help it get back to business in double-quick time.

Libya has an estimated 47bn barrels of proven oil reserves and while that looks small compared with, say, Saudi Arabia's 265bn, it is a lot more than Britain can lay claim to (less than 3bn).

The light "sweet" crude from Libya is not only very high quality, it can also easily be extracted from shallow wells in desert areas at a cost that some put as low as $2 a barrel – not bad if you can sell for $114 on the global market.

Five years ago, BP finally signed a Libyan deal worth $900m – its first in the country since Gaddafi nationalised all petroleum operations and threw out western businesses in 1974.

But the exploration explosion by BP, Shell and others who subsequently re-entered the country never properly got under way: the Arab spring brought operations in Libya to a chaotic standstill 18 months ago.

BP had 40 expatriate staffers in Libya before the civil war and as yet none has returned full-time. The 100 staff that had been taken on pre-2011 were kept on the payroll, even when they were unable, due to the unrest, to enter their offices.

Now the odd BP expat is back making visits to Libya and there are hopes that exploration efforts in the Libyan desert and offshore in the Sirte Basin can restart. While the company says it is optimistic about general prospects, its attitude towards Libya is much less urgent than to the Gulf of Mexico or even Egypt.

Shell signed a similar exploration deal in 2008, with a commitment to upgrade and modernise the Marsa al-Brega liquefied natural gas terminal south of Benghazi. But last May it suspended drilling and abandoned exploration in two blocks, citing disappointing results. Shell insists it is keeping an office in Libya and will continue to consider other opportunities but its retreat went down badly with the country's National Oil Corporation.

ConocoPhillips of the US, Eni of Italy and Wintershall of Germany are all still plugging away with Libyan oil producers, and energy consultancy Wood Mackenzie believes prospects are good – for oil, but also for much cleaner gas.

The oil business is a fickle one, with Kurdistan and the Arctic current flavours of the month for the oil giants. Despite Libya's credentials as a proven petroleum "province" close to European markets, in the absence of a major new discovery this oil-rich desert country remains out in the cold.


Percentage of Opec's proven crude reserves by member state, end 2010

Venezuela 24.8%

Saudi Arabia 22.2%

Iran 12.7%

Iraq 12.0%

Kuwait 8.5%

UAE 8.2%

Libya 3.9%

Nigeria 3.1%

Qatar 2.1%

Algeria 1.0%

Angola 0.8%

Ecuador 0.6%

Source: Opec Bulletin 2010/2011

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