Libya: Oil JVs must be led by Libyans

In Brazil it's local content; in Libya, it's local managers.

A government directive instructs all companies with foreign participation to appoint Libyan heads, according to a foreign oil executive and a western diplomat. All foreign companies, including those which are involved in oil production, operate as joint ventures.

Every country with oil (or any other depletable natural resource) faces the challenge of how to translate the fixed value of that resources into more renewable sources of economic value. Oftentimes this is by encouraging the development of domestic technical capabilities and companies (see Brazil) or value-added industries (like refining and petrochemicals in Saudi Arabia). Libya's latest move will strike some as more pernicious. Libyan mid-level managers could be passed off as capability-building; Libyan executives sounds more like empire-building for well-connected figures, and increasing control of oil production at the expense of foreign partners.

Obviously the news isn't being received enthusiastically by Western executives.

“This is not good for the Libyan economy,” said the western executive. “Companies which are here will stay but if you are still deciding you will think twice.”

... and...

“The usual way is at least for the general manager to come from the [foreign] company which pays the costs,” said an oil executive. “Exploration is paid for 100 per cent by the foreign partner. It is very difficult to believe that international companies will agree to a Libyan general manager.”

Libya is one of the most exciting locations in the world for new oil exploration (worth making major diplomatic sacrifices for, depending who you believe). But even so, this latest news will chill foreign interest, as companies increasingly worry about the specter of an old and familiar game - invite foreign companies in, find resources, commence extraction, acquire capabilities... and then kick them out and keep the full proceeds for your country.