Libya's 100-Percenter

In oil reserves and volume of production, the North African nation of Libya ranks decidedly behind such major Middle Eastern producers as Iran, Saudi Arabia and Kuwait. But in ability to send shock waves through the world petroleum industry, Libya stands second to none. Libyans have already helped lead the ten other members of OPEC, the Organization of Petroleum Exporting Countries, in doubling per-barrel prices over the past three years. In the past two years, Libya's President, Colonel Muammar Gaddafi, has nationalized British Petroleum's operations and negotiated a 50% share in Italian oil holdings; earlier this year, he asked for the same 50% stake in an American-dominated oil group. Last week Gaddafi shocked Western oilmen with his biggest demand yet: "100% control" of three mostly American operations that together pump more than two-thirds of Libya's oil (see THE WORLD).

The targets are Oasis Oil Co., which is owned by Continental Oil, Marathon Oil, Amerada, Hess and Royal Dutch/Shell; American Overseas Petroleum Ltd., owned by Texaco and Standard of California; and Occidental Petroleum. Negotiations between Oasis and the Libyans over the 50% demand had been proceeding fitfully for months until last week. Then Gaddafi called a Tripoli press conference and produced a couple of Israeli grapefruit that he said had been confiscated by Libyan workers at a pipeline terminal run by Oasis, the largest foreign producer. He accused Oasis of allowing Israeli spies to operate in Libya disguised as oil workers. Gaddafi gave the companies less than a week to submit plans for allowing a 100% takeover of their pumping operations. He added, vaguely but ominously: "No doubt the day will come when oil will be used as a weapon by the Arabs in self-defense."

U.S.-based executives of the threatened companies maintained sphinxlike silence about the demand, but other oilmen in Tripoli believe that the firms did submit vaguely worded takeover proposals before the deadline. Nervous Americans, faced with the peculiar task of proposing terms for their own buyout, complained privately that they did not know exactly what Gaddafi meant by "100% control." At minimum, Gaddafi might settle for part ownership of their assets and the appointment of Libyan nationals as chief executives. At the extreme, he will push for complete nationalization.

Short-Handed. A possible middle course would allow the government to own all the oil equipment and hire Western companies to operate it, an arrangement worked out between Iran and its foreign oil firms after the Anglo-Iranian Oil Co. was nationalized. One U.S. oilman terms such deals, which would allow U.S. companies to continue turning a profit in the Middle East, "the wave of the future," and Gaddafi probably will want foreign oil workers to remain on his soil, since Libya is short of native technical and managerial talent.

Yet, if the oil companies propose terms that Gaddafi finds unacceptable--and they are likely to demand compensation exceeding the roughly $1 billion book value of their Libyan assets--Gaddafi has threatened to close down production entirely.

Why did Gaddafi escalate his takeover demand from 50% to 100%?

Certainly not for immediate monetary gain. Libya has amassed some $3 billion in foreign reserves from oil sales--four times what it spends on imports in a year --and new revenue is coming in about twice as fast as the government can disburse it. Rather, the move may be a direct slap at the U.S.; Gaddafi has grown increasingly bitter against the Nixon Administration for its support of Israel.

In addition, Gaddafi insists on a nation's right to control its own oil, and he is probably determined to remain out in front of the other producing countries in securing that right from Western oil firms. If other OPEC members imitate his takeover demands, world petroleum prices could spurt upward even faster.

And the value of Libya's oil reserves, which Gaddafi has lately been trying to conserve by limiting production to about 60% of 1970's 3,700,000 bbl. a day, will increase accordingly.

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