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The glittering prospect of a Libyan gold rush

By Philip Eliason - posted Thursday, 12 January 2006


In the 1970s and up to 1987, when diplomatic relations were suspended, Libya regarded Australia as a prime source of training and educational opportunity. Several hundred students were studying in Australia at any one time across disciplines from dryland farming technology and agricultural engineering to civil engineering. Many of these students now occupy positions in Libyan ministries and universities.

Australia’s “alumni” in Libya provide a ready and capable base for a broader development of relations in future. It is clear those who studied in Australia harbour positive views towards the prospect of more frequent contact.

Three Australian Ministers have visited Tripoli in the past three years; Trade Minister Vaile in October 2002; the foreign minister in May 2004 for political and oil talks and the defence minister in 2005 for an ANZAC Day trip which combined useful contacts with several Libyan defence counterparts. Delegations from Western Australia, New South Wales and Queensland visited in 2003 and 2004.

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Contacts, such as the May 2005 visit by the Council of Australian Arab Relations to Libya, assist in raising Australia’s profile. The February 2005 visit to Australia by the chairman of the Libyan National Football Federation, engineer Sa’adi al-Gadhafi, third son of Muammar al-Gadhafi, and the Libyan national football team generated substantial positive media attention, augmented by courtesy calls by al-Gadhafi on the ministers for trade, foreign affairs and sports.

We can expect Libya to pursue diplomatic links with Australia at a pace and in a style officials here are unaccustomed to, especially in view of Libya's cultural focus on personal contacts and relationships, rather than more a “faceless” albeit professional and positive treatment by officials.

Libya has taken a range of steps to improve the prospects for its people. These include its major reorientation of foreign and economic policies towards diversified industrial growth. It has reallocated spending away from the military pursuit of its territorial and political integrity towards economic resilience as a means of ensuring security for the Libyan people.

The process of economic adjustment from a state-controlled economy through a mixed economy to a more market based system will take time. Signals are that the Libyan Government is committed to this course of action.

It has decided to progress the market orientation of the economy by starting the privatisation of certain industries, including banking, tourism and airlines. Two banks, the Sahari and Wahda, are being assessed and prepared for possible sale. Foreign banks are close to establishing a presence in Libya and domestic banks will need to adjust to address this competition.

Libya is establishing measures to facilitate foreign investment in the economy, notably in the hydrocarbons sector, but also in the housing, transport and tourism sectors. Early success of investment protection is visible in the health sector with joint ventures at hospital level with the Swiss and Maltese. Reduction of taxes on building inputs, promotion of private sector employment and improved consumer protection arrangements show Libya using regulatory reform and institution building as stepping stones to greater individual participation in the economy.

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The strength of Libya’s energy export sector underpins the provision of safety net arrangements for the population while it undergoes adjustment pressures.

In June 2005, the Energy Minister Ahmad Fathi Hamid ibn Shatwan announced that Libyan production had risen over the past two years from 1.3 to nearly 1.7 million barrels per day (mbpd), with a goal of 2.0 mbpd in early 2006 and 3.0 mbpd by 2010. Oil production was vastly higher in 1970 at 3.32 mbpd before post-revolution pricing, taxes and profit policies cut between 1969-73 active rigs by 85 per cent, completed wells by 78 per cent and crude oil production by 54 per cent.

Australia has done well in the oil market with Woodside Petroleum and Oil Search winning business of notable value. Australian firms bring great experience to Libya’s energy sector and, independently or in joint-ventures, there are further bidding prospects ahead. Libya in March 2005 held a second round of bids for rights to explore and develop oil resources. In the first round of tender bidding in January 2005, about 60 companies sought to participate in the market. Libya’s acreage explored for oil stands at about 400,000 sq km with some 1.3 million sq km to explore. Energy Minister Shatwan foresees potential of 100 billion barrels in reserves.

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About the Author

Philip Eliason, Director of Philip Eliason and Associates, advises Libya on issues relating to bilateral political and commercial links. He prepared Austrade's case to Government to open an office in Tripoli and has worked on issues relating to Iraq's post-war reconstruction as well as assessments relating to Middle East countries readiness for Australian consulting services.

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