Libyan embargo could shutter own projects: analysts


Libya’s embargo on Switzerland could end up shuttering its own major offshore and refining projects involving companies that have relocated to the Alpine state for tax reasons, analysts said.

It is likely that Libyan authorities did not realise their energy project partners such as Transocean Ltd, Noble Corp and Foster Wheeler were now based in Switzerland and would be caught up in the trade ban announced last month, said Samuel Csizuk of IHS Global Insight.
“There are high-profile and important projects on the line here. I don’t think they realised that when they called the embargo,” he said.
 ”They probably thought that their interests were divested from Switzerland and that by calling an embargo their interests wouldn’t suffer.”

Libyan leader Muammar Gaddafi called for jihad, or armed struggle, against Switzerland and last month slapped on a trade embargo in an escalation of a dispute over the 2008 arrest of one of his sons in Geneva over charges that were later dropped.

Transocean, which moved to Switzerland from the Cayman Islands and will list on the Swiss stock exchange this month, said  that Libya’s trade ban could prevent Russia’s Gazprom from deploying a Transocean rig to drill in Libyan waters.

Gazprom declared a “force majeure” in an April 6 notice about the Transocean rig, which was due to start an 11-month contract for Gazprom at a rate of $495 000 per day in July.
“We have rejected the notice on the basis that the claim is premature and the embargo should not apply to our operations in Libya,” Transocean said in a statement. “We are currently evaluating the situation and our rights under the contract.”


Other Swiss newcomers including Noble, which had also been based in the Caymans, and formerly Bermuda-domiciled Foster Wheeler are now trying to determine their exposure to the Libyan-Swiss dispute. Tripoli has not said how the Libyan energy projects would be affected.

Foster Wheeler, an engineering and contracting group, does not own assets in Libya but is looking into whether any of its design projects could be affected by the Swiss-Libyan tiff.
“As far as any impact on us, we are taking a look at it,” said spokesperson Scott Lamb. The offshore drilling company Noble is keeping close watch, according to spokesperson John Read. “As to any specific impact on us, I’m not aware of any,” he said.

Switzerland has worked hard to transform itself into an energy and commodities centre, offering very low tax rates to companies and trading houses relocating to the small country which prides itself on discretion.
“I just think the people around Gaddafi himself didn’t reflect on this trend of companies relocating to Switzerland,” Ciszuk said, stressing the trade embargo was unlikely to serve as a disincentive to companies considering a Swiss address.
“It just shows how problematic doing business in Libya is and how easy it is to get on the wrong side of the regime,” he said. “It shows the political risk of doing business in Libya and not the risk of doing business in Switzerland.”

Pic: President Muammar Gaddafi of Libya