A recent Newsmax article by former House Intelligence Committee Chairman Peter Hoekstra points out the dismal policy of the Obama administration of not taking more aggressive action in Libya.
Unlike the assertive action in Afghanistan and Iraq, where the United States had the central role in toppling the regime in a short period, President Barack Obama decided to take a back seat in Libya.
The prolonged suffering of the Libyan people won’t be taken lightly by the Transitional Council and the future administration, especially when contracts will be awarded for the reconstruction of the infrastructure of the energy sector.
A more courageous leader would have followed French President Nicolas Sarkozy’s example — France was the first country to support the Gadhafi opposition.
Sarkozy took a big risk, as at the time polls showed he wasn’t popular. Russia, China and Brazil made a big mistake in supporting Gadhafi or sitting on the sidelines.
The Italians, which have the longest history of doing business with Libya, its former colony, were smarter, offering to mediate early on in the conflict.
Italian Prime Minister Silvio Berlusconi, being a savvy businessman/politician, decided to support NATO at a later stage.
The British early on also supported the opposition in Libya and sent their air force and navy to help the rebels.
Italy is trying hard to point out that they signed agreements with the Libyan nation and not with its regime. It is unclear whether the new Libyan government will honor all the multi-billion dollar contracts signed with various Italian companies.
It is rather the French, British and to a lesser extent, the United States, which will benefit from new oil and gas contracts with Libya when it resumes the production of 1.8 million barrels of oil a day and exports nearly 90 percent of it.
BP had its oil fields nationalized in 1971 but signed an enormous exploration and production agreement worth $900 million with the Libyan National Oil company in 2007. BP has rights to explore 21,000 square miles onshore and offshore of Libya.
With Britain offering military support to the opposition from an early stage, Libya’s new regime is most likely to honor BP’s agreements.
While U.S. companies which withdrew from Libya at the beginning of the uprising might benefit once the new regime is in office (companies like Exxon, Marathon Oil, ConocoPhillips, Hess and Occidental), it is obvious that French, British and Italian companies will benefit the most. Total and ENI, both oil majors, have the most experience in Libya as well as geographically being nearest.
Both Total and ENI have low valuations (price earnings of about 6 both for 2011 and 2012) and pay high dividends. ENI pays a current dividend of 7.5 percent and Total 7 percent. Both are listed in the NYSE and are large caps. BP also has a low valuation (P/E of less than 6 both for 2011 and 2012) but its dividend is lower than the latter companies — 4.2 percent.
Another French company which could also benefit from the need to develop and service the oil fields is the Paris oil services and engineering company Technip, which is listed both in France and in the United States. Being much smaller than BP, Total or ENI, its potential future contracts with Libya will have a much larger impact on its revenue and profits.
Oil companies based in countries that rapidly supported NATO military action against Gadhafi will benefit most from future contracts.
Obama’s decision to be the last major Western leader to speak up on Libya might not be as advantageous for U.S. companies seeking new oil contracts.
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