CAIRO, Dec. 11 (UPI) -- As a third round of bidding for oil rights in Libya is held this week, the country's future as a stable exporter of oil looks bright, and with it so does President Moammar Gadhafi's hold on power.
Over the past two years, foreign oil companies have quickly moved back into the country through two rounds of bidding for production and exploration parcels. A third round of bidding will occur Dec. 10. Under the terms of Libya's exploration and production agreements, foreign companies will fund the exploration and share in production profits with Libya's state-run National Oil Co.
Last week also saw an international energy forum in Tripoli, aimed at attracting international investment in all aspects of the Libyan energy sector, from oil and natural gas exploration to the development of renewable energy sources.
Libya's energy exports suffered from U.S. and U.N. sanctions for most of the 1990s and into 2003 because of its involvement in the bombing of Pan Am flight 103 over Lockerbie, Scotland. But it was not until 2004 that relations with the United States were normalized and U.S. oil companies became free to do business there.
In fact, it was Libya's decision to comply with international demands regarding the Lockerbie bombing, as well as its decision to abandon their nuclear program and open up the country to inspections that led to the rapid re-engagement.
Libya's decision to engage the international community has already paid off. Oil and natural gas exports contribute 75 percent of government revenue, according to the government. Oil exports alone brought in more than $28 billion in 2005, according to the U.S. Energy Information Administration, the Department of Energy's data arm.
Tripoli's ambitions are high. It hopes to raise production from its current 1.6 millions barrel per day to 3 million bpd by 2015, an increase that will require more than $30 billion in investment.
With U.N. and U.S. limits out of the way, foreign oil companies are lining up to get a share of Libya's more than 39 billion barrels in proven reserves, which is more than the United States and Western Europe combined, and pitch in with the investment, despite Gadhafi's regime.
Gadhafi, who has been in power since 1969, and his government have been at odds with the United States since the early 1980s, but quickly improving commercial relationships, despite continued reports of human rights abuses, may bolster Gadhafi's control.
"Gadhafi will benefit by being more firmly ensconced in the saddle. Libya's isolation had, by impacting on its economic growth, made Gadhafi less alluring to Libyans at large, although I doubt he was in any real danger of being toppled," according to S. Azmat Hassan, a professor at the Whitehead School of Diplomacy and former Pakistani ambassador to several Middle Eastern countries.
Gawdat Bahgat, who is the director of the Center for Middle Eastern Studies at Indiana University of Pennsylvania, and who has written extensively about energy security and Libya, agrees.
"Like most other oil countries, oil revenues are used in Libya to buy off any opposition to the Gadhafi's regime. Indeed, economic sanctions imposed in most of the 1990s were the main reason for the current change in economic and political orientation. Gadhafi's son, Saif al-Islam, has a master's degree from Austria and is considered much more Western-oriented than his father," Bahgat said.
Libya's moves to follow a more Western model in the foreseeable future are indeed reflected in the leadership of some of the most important areas of Libyan government.
"The head of Libya's national oil company (former prime minister) had his Ph.D. from Tufts University here in the U.S.," Bahgat said.
These changes also make for more secure energy supplies.
"I do believe that Libya will continue its move toward liberalizing its energy sector and oil and natural gas exploration will be stable," Bahgat said.
And while Gadhafi will likely remain in power, even his loss would not mean any less reliable oil relations, Hassan said.
"Current indications do not point to any incipient instability in Libya's political environment which could adversely affect its oil and gas output. Libyan politics is of course dominated by Gadhafi, but he could govern for some more years. His departure need not, ipso facto, lead to unmanageable stability, as another authoritarian figure is likely to emerge from the ruling party to carry on the business of government," Hassan said.
Tripoli is not the only player to win by these changes. Companies in both the United States and Europe stand to gain from Libya's expanded oil and natural gas business, Hassan said.
"Libya is keen to gain from normal political and commercial relations with the United States specially, but Europe because of its relative proximity to Libya will also reap greater benefits from Libya's oil and gas resources," Hassan said.
"Given Libya's geographical proximity to Europe, it is likely Europe will benefit more than the U.S. Still, the oil global market, and to a less extent, gas market are well integrated. The source of oil matters less than its availability. As long as there is enough oil in the market, where it comes from is less important," Bahgat said.
Libya's quick success in engaging international energy firms may even lead to further economic liberalization in the region, he said.
"Recently, Algeria took few steps to strengthen state control over its energy sector. Egypt has a mixed management and ownership. ... Libya is smaller than Algeria and Egypt, but its success in attracting foreign investment and ... (increasing) production are likely to convince its neighbors to follow suit," Bahgat said.
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