The Libyan gold rush and the reasons behind it

… So what makes Libyan oil and gas so special – so valuable that the government might want to intervene in something as sensitive as the Lockerbie bomber’s punishment in order to preserve Britain’s chance of a part in the Libyan gold rush? And why is it only now, with the Megrahi affair in the headlines, that Libyan oil is such an issue?

As usual, the driver is geo-political – national security coupled with energy scarcity and price. At present, most of the West’s oil comes from the Middle East while much of the gas comes from Russia

That’s why bringing Libya in from the cold was, and is, so crucial. After 20 years of being cut off from the US and the UK because of the sanctions imposed back in the 1980s by Ronald Reagan, Libya has more or less been excluded from Western markets so its oil and gas production has been hampered. Production peaked in the 1970s with 3.3 million barrels a day, falling to 1.85 million by 2007.

David Strahan, author of The Last Oil Shock, says Libya is aiming to push production back up to 3 million barrels a day over the next few years: “There’s no doubt that after the Iraq invasion, Libya was scared that they could be next because of its huge under-exploited reserves. Everyone involved – the US, the UK and Libya – understood that a rapprochement between them was vital.”

But it’s not just a case of Libya having been frightened of western intervention. The West has been equally anxious about its dependency on Russian supplies, which is why it is looking for alternatives. Libyan oil is not only high-quality light crude while its gas can be turned relatively easily into LNG (liquified natural gas), but the hydrocarbons can be brought relatively cheaply and safely into British homes via the pipeline into Italy or direct by sea.

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