Sanctions Expected to Have Only Marginal Effect on U.S. Oil Firms
President Reagan’s ban on trade with Libya is expected to have only a marginal financial impact on U.S. oil companies operating in that country, industry analysts agreed Wednesday.
Although the companies are still producing an estimated 200,000 barrels of crude oil a day in Libya, analysts said that profits there have been slim due to a combination of high operating costs and falling oil prices. Further, the firms will be cushioned against any lost petroleum production because of their large size and broad base of operations.
The American companies affected by the Reagan directive include Occidental Petroleum, based in Los Angeles; Marathon, a subsidiary of U.S. Steel; Conoco, a unit of Du Pont; Amerada Hess, a diversified energy company, and a small subsidiary of W.R. Grace & Co., a chemical, natural resources and consumer services concern.
“The oil companies don’t make any money over there; nobody does,” said Bruce Lazier, an analyst in the New York office of Prescott Ball & Turben, an investment firm. “The taxes are too high. If Libya vanished tomorrow, it wouldn’t hurt Occidental, Marathon or anyone else operating there.”
Andrew Gray, financial analyst with Pershing & Co. in New York, estimated that Libya now accounts for less than 1% of Occidental’s profits, which were $569 million in 1984. “What does this Libyan thing mean?” he asked. “It’s a big zero, a non-event.”
Oil company spokesmen have stopped short of conceding that Reagan’s executive order means they must leave Libya. Although all said they will obey the law, they added that they will not comment in detail until their lawyers have studied the order.
Sources on Wall Street say this stance suggests that the oil companies are exploring ways to continue operating in Libya through foreign-based subsidiaries. But an official of one of the firms said this would be unlikely without the blessing of the U.S. government.
“That could be construed as subterfuge,” he said. “We wouldn’t do anything like that without trying it out on the State Department or the White House.”
One non-oil firm still in Libya is the engineering concern Brown & Root Inc., a subsidiary of Houston-based Halliburton Co., which is helping a South Korean construction company build a 1,200-mile fresh-water pipeline from the desert to cities on the coast.
If Brown & Root is forced to leave, the project probably will continue because “our (foreign) competitors would be delighted to pick up the contracts and see them out,” Halliburton spokesman Guy Marcus said.
