A Libyan miracle emerging from the Arab uprising

MEED’s Libya Focus Day highlights the business and project opportunities arising in the post-Gaddafi era

MEED’s remarkable Libya Focus Day in Dubai on 16 May brought together four representatives of the National Transitional Council (NTC), a heterodox group of Libyan business people, and dozens of uncertain foreigners wondering whether reconstruction in a country wrecked by four decades of dictatorial rule will ever come.

The Libyan business opportunity nevertheless has rarely looked more compelling. Oil production is expected to return next month to levels last seen before the start of the uprising that ended Muammar Gaddafi’s regime. Libya can expect to earn at least $45bn from oil exports this year and its economy should return to its 2010 position. Gaddafi’s austere rejection of credit means the new regime’s got obligations, but practically no debts.

The loss of life and property during the uprising was severe and many suffered permanent injuries. But the damage done to the infrastructure was essentially superficial. As Libyans living in Libya never tire of saying, Libya in 2012 isn’t like Iraq in 2003.

Internal divisions will take longer to repair. Practically no Libyan with professional, management or business skills can escape the charge that they at least silently accepted the previous regime’s excesses. But a divide has nevertheless emerged between those that kept their heads down until Gaddafi was dead and the minority that rebelled before.

It expressed itself during the Libyan Focus Day and was voiced by Libya’s ambassador to the UAE, Aref Nayed, who warned foreign companies to steer clear of business people with links to the previous regime that were hawking themselves as middle-men now. Nayed was talking about members of the audience he was addressing.

And yet, there was little rancour in the room. Everyone lost materially, morally or spiritually under Gaddafi. All Libyans, including his closest family members, were victims.

Suleiman Al-Fortia, NTC housing and utilities committee head, said a government capital budget of about $30bn had been approved for 2012 and that more large-scale investment was planned in the years to come. This was a huge opportunity for the domestic private sector and foreign companies ready to deal with Libya in a new and better way.

But the legacy of the past is inescapable for the hundreds of western firms that were encouraged by their governments to participate in the Libyan economy in the years following Gaddafi’s renunciation of weapons of mass destruction in 2003.

Aecom’s programme director for housing and infrastructure board projects, Christopher Toomey, said his company signed up for Libya’s housing projects in 2008 and continued working on them until the US government imposed sanctions on the regime in February 2011. With sanctions lifted following the end of the uprising on 23 October 2011, Aecom has been seeking to revive its contract. It says it’s still valid and relevant. Toomey said that revisions could lift its ultimate long-term value to $100bn.

The issue for Aecom and companies in a similar position is to secure the new regime’s blessing for Gaddafi-era contracts. Al-Fortia said that more than 10,000 companies are now being reviewed by a special body empowered by the NTC to terminate those deemed to have been secured through corruption or other unfair practices.

Clyde & Co’s Adrian Creed said that it would be impossible to carry out a review of so many contracts credibly and quickly. One way round the problem is to approve contracts that are already at least 70 per cent complete. Another is for contracts with Libyan businesses, most of them worth $1m or less, to be automatically cleared.

The impact of the review is obvious to recent visitors to Libya who say that idle cranes and incomplete projects are the defining characteristic of many Libyan towns and cities.

The good news is that doing business and setting up a branch or company in Libya is possible and comparatively straightforward. Commercial laws dating as far back to the Libyan monarchy, which lasted from 1951 until 1969, are viable and enforceable, lawyers say.

The most radical views were expressed by Husni Bey, the charismatic chairman of the Husni Bey Group. Bey dismissed the National Transitional Council as redundant in light of elections to a public national conference due in June; repeated his call for the 10,000 contracts to be reactivated immediately or scrapped and called for the role of the Libyan state to be radically reduced.

NTC deputy chairman Mustafa el-Huni, a pragmatist who addressed MEED’s previous Libya conference in Dubai in 2010, was emollient. “Moderation is the main principle we shall follow,” he said. “There are some contracts and agreements that need to be reviewed, but if this will be done within the spirit of mutual co-operation. We have no intention to nationalise or do anything radical, even if they are unfair contracts.”

Not every Libyan in the room agreed. But at least they were prepared to listen. By the standards of other states divided by the dramas of the Arab uprising, that was a Libyan miracle in its own right.

Source: MEED. the article: http://www.meed.com/sectors/economy/government/a-libyan-miracle-emerging-from-the-arab-uprising/3138170.article#ixzz1v8CtFSOk

Libya currently producing nearly 1.5 mil b/d crude: NTC official

Libya is currently pumping nearly 1.5 million b/d of crude and expects to achieve "normal" pre-war production levels of 1.6 million b/d by mid-2012, Abdulbaset Abadi, a member of the oil committee at the National Transitional Council, said Wednesday.

Speaking at the MEED Libya Focus Day in Dubai, he said Libya was seeking foreign assistance to raise the country's oil production capacity to 2.2 million b/d in 2015 and 3 million b/d in 2020. The country's current production capacity is estimated at about 1.6 million b/d.

International oil companies with production sharing contracts signed with the regime of the late Libyan dictator Qadhafi that are due to expire in 2012 will get contract extensions on account of Libya's 2011 revolution, Abadi said.

Libya plans to announce the structure of new enhanced production sharing agreements to replace the Qadhafi-era contracts in 2015, he said. 

Separately, NTC deputy chairman Mustafa el-Huni said Wednesday at the same event that Libya's 2012 budget assumes crude oil production of 1.5 million b/d and exports of 1.3 million b/d.

The national budget of Libyan Dinar 68 billion ($54.38 billion) for the 2012 calendar year, approved in February, is also based on projected natural gas output of 16 billion cubic meters this year, he told delegates.

The budget includes Dinar 38 million earmarked for development spending, including investment in civil and petroleum sector infrastructure, Huni said.

The NTC projects government revenues from the petroleum sector of about $45 million in 2012. The remainder of the budget will be funded from Libyan assets that were frozen in overseas accounts during the country's 2011 revolution, he said.

Huni reaffirmed Libya's intention to honour all agreements with foreign investors signed by the Qadhafi regime.

"We have no intention to nationalize or do something radical," he said.

"Libya is in essence a moderate country that will look at implementing moderate policies." Elections for a National Congress to replace the NTC are scheduled for June. The 85 members of the NTC have pledged not to run for office in order to minimize the transitional government's influence on the election, Huni said.

Abadi said in his presentation that a number of new oil and gas discoveries in Libya in 2009 and 2010, including 24 reported in 2010, had raised the country's proven and probable reserves to an estimated 45 billion barrels of crude oil and 55 Tcf of gas.

US Geological Survey data put the potential for further Libyan oil discoveries at more than 8 billion barrels, including 4.7 billion barrels of conventional onshore crude, while undiscovered gas potential was put at more than 43 Tcf, Abadi said.

He presented an encouraging picture of the current state of Libya's oil export facilities: while the terminal at the port of Sidra had been destroyed by pro-Qadhafi forces, there were no significant operational problems at Brega, Marsa or Tobruk, and only minor damage at Ras Lanuf.

The Libyan petroleum sector's major immediate requirements were the replacement of numerous 4X4 vehicles destroyed in the recent conflict, telephone and Internet services at oil and gas facilities, security services to protect expatriate workers and workforce housing, Abadi said.

The biggest short-term bottleneck was likely to be communications infrastructure, which would take some time to extend to remote oil and gas facilities, he said.

www.soclibya.com

Source: Platts  by Tamsin Carlisle,  and edited by Jonathan Fox