After nearly two decades as a pariah in the West, Libya achieved a major milestone this past week in healing old rifts, as President George Bush lifted most major sanctions on the North African nation. And no one was happier to welcome Libya back into the fold than ConocoPhillips (NYSE:COP), Marathon Oil (NYSE:MRO), Amerada Hess (NYSE:AHC), and Occidental Petroleum (NYSE:OXY).
The aforementioned oil concerns hold assets in Libya that were effectively frozen when sanctions were imposed in 1986. In the intervening years, the companies' Libyan properties have fallen into disrepair, and overall oil production in the country has dwindled. At the same time, new discoveries have put the nation's proven oil reserves at 36 billion barrels, and some experts suggest its reserves may exceed 100 billion barrels.
Marathon, ConocoPhillips, and Amerada Hess, which operated together in Libya as the Oasis Group, are particularly eager to reclaim their holdings. The group holds a 41% stake in Libya's prize Waha oil field. Before the group departed, its production from the field was 400,000 barrels a day.
To put the license's value in perspective, Marathon, which has a 16.3% stake in Oasis Group, removed 300 million barrels of reserves from its books following the imposition of sanctions. Today, Marathon's total reserves, including natural gas and oil, amount to 1 billion barrels.
Occidental, meanwhile, has less significant holdings, although its stake is nothing to sneeze at. The Libyan oil on its books at the time of its departure came to about 312 million barrels. Its total oil and gas reserves are currently 2.5 billion barrels.
A smooth re-entry into Libya won't necessarily be a cakewalk, however. Oasis Group's license is set to expire in 2005, so it has to negotiate to maintain its presence. In addition, competitors are joining in the fray. Royal Dutch Shell, traded under the monikers Royal Dutch (NYSE:RD) and Shell Transport (NYSE:SC), is eager to remedy its reserve problems, so it's not surprising that it signed a $200 million deal with the Libyan government in March for exploration and development.
Given the companies' foothold, shares of Marathon, ConocoPhillips, Amerada Hess, and Occidental may be in for a boost as this story unfolds. Nevertheless, many of these stocks have already seen good runs, though, so investors probably shouldn't expect them to turn into gushers.
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Fool contributor Brian Gorman is a freelance writer living in Chicago, Ill. He does not own shares of any companies mentioned here.
