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Libya on July 24 released six medics, who had been imprisoned for eight years for allegedly deliberately infecting more than 400 Libyan children with HIV, to Bulgaria. Libya's extradition of the medics ended a long diplomatic standoff and heralded a new era of EU-Libyan relations -- one that will open Libya to much-needed investment while giving Europe another investment outlet and a means to secure energy supplies.
Libya needs investment in its energy sector, but the country has long been off-limits for foreign companies, despite the great appeal of its vast energy resources. The discovery of significant energy reserves there in the late 1950s attracted significant foreign investment, but all this changed once Libyan leader Moammar Gadhafi nationalized the industry in the early 1970s. Libya seemed to revel in its status as an international pariah for years, though that status led to a lack of investment and thus necessitated the use of outdated technology in the energy sector. However, the 9/11 attacks triggered significant changes, as Gadhafi believed he might become a target of U.S. ire. Among other conciliatory measures, Libya announced plans to rid itself of all weapons of mass destruction in 2003. Despite Gadhafi's peace offerings, the six medics' case still posed a problem for Europeans and negated any chances for enhanced EU-Libyan relations. Now, with the medics back in their home country, Libya is eligible for European investment.
Libya will find that the European Union is a willing and capable investor; Europe stands to benefit just as much as -- if not more than -- Libya does from a business relationship between the two. The European Union has long looked to decrease its dependence on Russia, and increasing energy imports from Libya would give Brussels more breathing room in its dealings with Russia.
Libya has proven natural gas reserves of slightly more than 53 trillion cubic feet (tcf), but the country's actual reserves could be as much as 70-100 tcf. Furthermore, Libya hopes that foreign participation will allow it to increase its oil production capacity from its current 1.6 million barrels per day (bpd) to 2 million bpd -- a level Libya has not seen since the late 1970s -- between 2008 and 2010, and to 3 million bpd by 2015. For purposes of comparison, Europe consumes more than 15 million bpd, using most of the roughly 6 million bpd of oil and oil products exported by Russia.
While the size of Libya's reserves is significant, its location might be even more so. Europe has been tied to Russia in part because of geographic proximity and land ties that make pipelines between the two countries easy to construct, but Libya also is close to home for the Europeans. Italy, which is perched above Libya across the Mediterranean, stands to gain significantly as a transit point for supplies going to the rest of Europe, particularly as a liquefied natural gas hub.
European energy companies are giddy at the prospect of investing in Libya, and European leaders are opening the door for them. A spokesman for then-British Prime Minister Tony Blair on May 29 announced BP's return to Libya after a 33-year hiatus. Not to be left out, French President Nicolas Sarkozy traveled to Libya on July 25 to discuss the countries' political and economic ties.
Tripoli, meanwhile, has been more than willing to cooperate. On July 8, Libya announced plans to allow foreign companies to bid on the exploration of its natural gas reserves. Libya will offer a dozen contracts to explore 41 natural gas blocks, formally presenting the fields for development in August, with the final allocation of the fields set for December. While Libya has opened up to international bids for its oil reserves in the past, this reportedly is the first open bid for its natural gas reserves -- and companies already are champing at the bit.
Chemical companies are likely to follow close behind oil and natural gas companies moving into Libya; it makes business sense for chemical companies to locate their facilities in areas with plenty of natural gas, a primary raw material in the industry. Over time, Libya also will likely open further to other industries, such as tourism and banking. In fact, in 2005 Libya announced its intention to encourage the development of its tourism sector; European investment will allow the country to make greater strides toward that goal.
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