Energy cities no easy feat

24 August 2010

Libya breathes new life into its delayed energy hub development. Tripoli now faces task of rebuilding its relationship with foreign majors

Libya’s plans to turn the Gulf of Sirte cities of Ras Lanuf and Marsa el-Brega into two $54bn energy hubs are once again on the move. A newly created development company will start talks with international oil and petrochemicals firms over investment into the scheme in September.

The masterplan for the project contains every-thing any ambitious developing state could hope for: Job creation, technology and expertise transfer, economic diversification, as well as private investment. The company behind the masterplan, the US’ Fluor Corporation, is also advising the Libyan government on new policy and legal frameworks to make the schemes as attractive as possible to foreign investors.

The 15-year time frame set out for the two cities also allows plenty of breathing space for the developer, Energy Cities Development Company, to make it work.

However, as the six-month delay for the government to approve the formation of the development company shows, it is unlikely the project will move forward smoothly.

Libya has had a historically fractious relationship with outside oil firms and only started to open up to Western companies in 2004, when the US and the EU lifted economic sanctions. Since then, the relationship between foreign majors and the government has remained far from easy.

Oil majors are cautious about investing in Libya after Tripoli forced several companies to accept a lower share of revenues from the oil and gas they produce in the country. In late 2008 and early 2009, Libya revised its contracts with Italy’s Eni, the US’ Occidental Petroleum Corporation, Spain’s Repsol and France’s Total, among others.

Nevertheless, the country is one of Africa’s biggest hydrocarbons producers, and as such will remain a huge draw for foreign firms. Leveraging that interest with well thought-out plans such as the energy cities schemes can only work to the country’s benefit.


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