Lifting sanctions would improve Libya’s status, but in economic terms the act would be a formality because European companies have been investing millions of dollars into oil exploration since 1999, when United Nations sanctions were suspended.

US sanctions forced American companies, including ConocoPhillips, Marathon Oil and Amerada Hess Corp out of Libya.

US oil companies have spent years lobbying the White House to return to their concessions in the North African country and may have detected a ray of hope in Wednesday’s deal.

But US officials suggest there is little immediate chance of any change. Asked what effect lifting the UN embargo would have on the possible lifting of US sanctions, one American official said: “Nothing”.

US firms were ordered out of Libya by then US President Ronald Reagan’s 1986 executive order. The Bush administration is far from scrapping its sanctions even if UN measures are lifted, possibly as early as next week.

Industry Pressure 

"The big prize on the radar screen of the major oil companies would be a combination of Russia and Iraq rather than Libya."

Oil industry analyst

Members of the Oasis Group, a consortium of US oil companies with holdings in Libya, have been preparing for the day when US sanctions are lifted.

“The US companies still own the blocks. They have never lost title to them. There have been talks in preparation for the lifting of sanction,” said an industry analyst.

The US sanctions on Libya include a ban on imports of Libyan crude oil to the United States, dating from 1982 and expanded sanctions in 1986 that include a ban on direct trade, commercial contracts and travel-related activities.

They also include the Iran-Libya Sanctions Act passed in 1996 and later amended, under which Washington can punish non-US firms investing more than $20 million annually in the energy sectors in Libya or Iran.

Europe and other world powers oppose the legislation. It has been waived by Washington in some cases.

Opportunities

European firms, including Italian oil company Agip and Total, have bought concessions in Libya and seen modest exploration success.

Analysts have said whether or not the muddle of laws surrounding Libya can be swept away depends on how much pressure the US oil sector brings to bear.

“I think there might be pressure from companies but I think it’s going to depend very much on what other opportunities are available to them,” said Julian Lee, a senior oil analyst at the London-based Centre for Global Energy Studies (CGES).

“Clearly the big prize on the radar screen of the major oil companies would be a combination of Russia and Iraq rather than Libya,” he said.

“But for a large number of medium-sized oil companies, Libya represents a very attractive opportunity.”