“Oil companies are controlled by foreigners who have made millions from them. Now, Libyans must take their place to profit from this money.”—Muammar Gadhafi, 2006.
By Stephen Gowans
May 6, 2012
The Wall Street Journal of 5 May offers evidence, additional to that already accumulated, that last year’s NATO military intervention in Libya was rooted in objections to the Gadhafi government’s economic policies.
According to the newspaper, private oil companies were incensed at the pro-Libyan oil deals the Gadhafi government was negotiating and “hoped regime change in Libya…would bring relief in some of the tough terms they had agreed to in partnership deals” with Libya’s national oil company. 
For decades, many European companies had enjoyed deals that granted them half of the high-quality oil produced in Libyan fields. Some major oil companies hoped the country would open further to investment after sanctions from Washington were lifted in 2004 and U.S. giants re-entered the North African nation.
But in the years that followed, the Gadhafi regime renegotiated the companies’ share of oil from each field to as low as 12%, from about 50%.
Just after the fall of the regime, several foreign oil companies expressed hopes of better terms on existing deals or attractive ones for future contracts. Among the incumbents that expressed hopes in Libyan expansion were France’s Total SA and Royal Dutch Shell PLC.
‘We see Libya as a great opportunity under the new government,’ Sara Akbar, chief executive of privately owned Kuwait Energy Co., said in an interview in November. ‘Under Gadhafi, it was off the radar screen’ because of its ‘very harsh’ terms, said Mrs. Akbar. 
The Journal had earlier noted the “harsh” (read pro-Libyan) terms the Gadhafi government had imposed on foreign oil companies.
Under a stringent new system known as EPSA-4, the regime judged companies’ bids on how large a share of future production they would let Libya have. Winners routinely promised more than 90% of their oil output to NOC (Libya’s state-owned National Oil Corp).
Meanwhile, Libya kept its crown jewels off limits to foreigners. The huge onshore oil fields that accounted for the bulk of its production remained the preserve of Libya’s state companies.
Even firms that had been in Libya for years got tough treatment. In 2007, authorities began forcing them to renegotiate their contracts to bring them in line with EPSA-4.
One casualty was Italian energy giant Eni SpA. In 2007, it had to pay a $1 billion signing bonus to be able to extend the life of its Libyan interests until 2042. It also saw its share of production drop from between 35% and 50%—depending on the field—to just 12%. 
Oil companies were also frustrated that Libya’s state-owned oil company “stipulated that foreign companies had to hire Libyans for top jobs.” 
A November 2007 US State Department cable had warned that those “who dominate Libya’s political and economic leadership are pursuing increasingly nationalistic policies in the energy sector” and that there was “growing evidence of Libyan resource nationalism.” 
The cable cited a 2006 speech in which Gadhafi said: “Oil companies are controlled by foreigners who have made millions from them. Now, Libyans must take their place to profit from this money.” 
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