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WASHINGTON � U.S. law firms may not yet be combing the streets of Tripoli for office space, but they’re eyeing Libya as a market that could take off in the next few years as ever-improving relations between the North African nation and the United States open a spigot of oil-related work. The Bush administration’s announcement last week that it was restoring full diplomatic ties with Libya and notification to Congress that it will take the country off the list of state sponsors of terrorism will make life easier for American oil companies that returned to Libya after the United States lifted the majority of its 18-year-old sanctions in 2004. As Libya is considered one of the promising sites in the world for oil exploration, lawyers say most of the initial work will involve representing clients in the oil sector and support industries. Libya, which has some of the world’s largest proven reserves of oil, has stated that it intends to double its oil production in the coming decade and has opened itself to investment by U.S. and other foreign companies in order to reach that goal. Other major infrastructure projects will follow once oil exploration is successful and funds start to flow into government coffers, predict lawyers who already do business in Libya. The country’s removal from the state-sponsored terror list will relax export licensing requirements for certain products destined for Libya, which will facilitate the import of equipment and technology these companies need to run their operations. But even more important, taking Libya off the list will lower the psychological and public relations hurdles of doing business there. The restoration of full diplomatic relations is the latest step in a series of improvements in the two countries’ relationship, which began to thaw in 2003 after Libya agreed to compensate the families of those killed in the bombing of Pan Am Flight 103 over Lockerbie, Scotland, in 1988 and to give up its nuclear and chemical weapons ambitions. Firms with strong energy and project finance practices have been analyzing the market and positioning themselves to represent more clients doing business in Libya since U.S. companies were allowed to invest again in the country two years ago. Rindala Beydoun, a senior counsel in Vinson & Elkins’ Dubai office, says four Vinson lawyers hopped on a plane the week sanctions were lifted to attend a major conference on investing in Libya. The Houston-based firm appears to be one of the most active U.S. law firms in Libya. It represented Occidental Petroleum in its negotiations for the reclamation of the exploration concession it was forced to abandon in 1986 when sanctions were imposed, according to the firm’s Web site. Beydoun says she represents U.S.-, Japan- and United Arab Emirates-based clients in Libya. Much of her work is in the energy sector, but she says she is also involved in two major property development projects. Vinson has 10 to 12 attorneys in its Dubai, Houston, Tokyo, London, and Washington offices doing Libya-related work, Beydoun adds. In addition to Vinson & Elkins, other firms with strong energy practices, such as Fulbright & Jaworski and Chadbourne & Parke, have represented oil sector clients in Libya. And others, including Hunton & Williams, have been strategizing on how to get involved. “It’s going to be a whole new ballgame,” says John Beardsworth, a partner with Hunton & Williams’ energy and project finance group. “We are working internally to get on top of it,” he says, noting that Hunton has been talking to its energy company clients to see if there’s a match. He adds that he noticed quite “a buzz” about Libya at an oil and gas conference he spoke at in April in Algiers, Algeria. “I sort of view Libya as the Gulf 30 years ago,” Beydoun says. “There’s no doubt that it’s a rich country. The money is yet to flow, but once it starts flowing, then you would expect a lot of work and a lot of projects to rebuild the country.” Reema Ali, the Washington-based managing partner of Ali & Partners, a firm with offices around the Middle East, cautions that although Libya is a “potentially lucrative market, it could be hard to penetrate.” Ali says the firm has formed a partnership with a local Libyan firm and has represented financial services companies as well as companies in the energy and telecom sectors. Libya’s recent history is very different from that of its neighbors, having been ruled in accordance with leader Moammar Gadhafi’s “hodgepodge of socialist and Islamic principles” for more than three decades, she says. A ROGUE REGIME NO LONGER? Lawyers doing Libyan work say the removal of principal sanctions in 2004 was the watershed moment for U.S. firms wanting to do business in Libya. Libya’s removal from the state sponsors of terrorism list should make it easier for companies to do business there in a number of ways, says Scott Maberry, a partner in Fulbright & Jaworski’s Washington office who has advised several U.S. companies in Libya on complying with U.S. export-control regulations. Libya’s removal will make it easier for U.S. companies to export the capital equipment, goods and technology they need for their operations there, because they will no longer be required to get export licenses for a wide range of goods. Once the North African nation is dropped from the terrorism sponsors list, this will also lead to a relaxation of the prohibition against financial transactions between the Libyan government and U.S. entities. Additionally, U.S. companies doing business there will no longer be subject to scrutiny by the Securities and Exchange Commission’s Office of Global Security Risk for doing business in a country on the terrorism list. But many attorneys doing work in Libya say the psychological effect of taking Libya off the terrorism list could prove to be even more significant than the dismantling of these technical barriers in terms of increasing U.S.-Libyan investment and trade. “It adds to Libya’s credibility,” Beydoun says. “It’ll give investors more confidence that the lifting of the sanctions is here to stay.” Companies doing business with countries considered rogue regimes can incur the wrath of shareholder groups, which question whether the companies should get involved with such governments, Beardsworth says. Peter Flanagan, a partner at Covington & Burling who also advises U.S. energy companies doing business in Libya on export-control regulations, agrees that Libya’s removal from the list will reduce the reputational risk of doing business there. Improved U.S.-Libya ties should also increase the availability of financing for large projects from multilateral lending institutions such as the World Bank and the International Finance Corp., since the United States should not automatically veto funding these projects, as it has in the past, Flanagan says. BLACK GOLD At a time when the price of oil regularly reaches $70 a barrel, U.S. and other foreign oil companies have been eagerly eyeing Libya, because of the quality of its crude oil, its relative proximity to U.S. and European markets compared with oil producers in the Persian Gulf, and relatively low recovery costs, which range from $1 to $5 per barrel, says Nabil Khodadad, a partner in Chadbourne & Parke’s London office who represented a Canadian oil company that bid on exploration rights in Libya. According to the Department of Energy’s Energy Information Administration, Libya had proven reserves of 39 billion barrels at the end of 2005. But large areas of the country remain unexplored due to decades of United Nations and U.S. sanctions and the resulting lack of foreign investment and technology needed to develop the country’s oil resources. During this period, Libya could barely maintain the oil facilities it already had, Ali says. After the sanctions were lifted, U.S. oil companies that had been active in Libya before the imposition of sanctions negotiated their re-entry into the country. In August 2005 the Libyan government allowed Occidental to return to its Libyan operations on generally the same terms it had when it suspended its operations, according to Occidental’s most recent annual report to the SEC. In late December 2005, Marathon Oil, Amerada Hess, and ConocoPhillips reached an agreement with Libya’s National Oil Co. to return to their former oil and natural gas exploration and production operations, as well. Moreover, U.S. companies participated aggressively in the two rounds of auctions for exploration rights the National Oil Co. conducted in 2005. “There was keen interest in the first round, with 63 international companies from six continents submitting bids,” according to Khodadad. U.S. companies won, or were in consortia that won, 13 of the 15 exploration areas in the initial round, which concluded in January 2005, he says. Occidental was the successful bidder on nine of those 13 areas. The National Oil Co. concluded a second licensing round in October 2005, in which Asian companies were particularly successful, and is expected to announce another round sometime this year, lawyers who represented bidders in the previous round say. In addition to the tenders for exploration rights, the Libyan government says it will look for partners in order to help it enhance oil recovery and increase production at already existing wells, Khodadad says. It’s not clear whether it will hold a formal tender or whether it will be an informal competition, but the process should also yield opportunities for the law firms representing clients interested in the work. Although the bidding process itself doesn’t generate a tremendous amount of legal work, because it is based on standard documents and often handled by in-house counsel, projects related to the development of new sources of oil and gas that result from the exploration process should increase the demand for outside counsel, says Stephen Davis, a co-head of Vinson & Elkins’ Middle East/North Africa practice group. Randel Young, an energy partner in Fulbright & Jaworski’s Houston and London offices, says Fulbright represented at least one non-U.S. company in the early days of the bidding process and adds that he expects commercial discoveries to generate more legal work in Libya, especially in terms of structuring and financing deals for major downstream projects such as refineries and petrochemical plants. Young also represents a number of U.S. energy supply and services companies looking to get involved in such projects in Libya. “From the beginning I never thought that Libya would boom immediately,” Beydoun says. “These things take time, but it’s coming,” she says. “I definitely think there will be more work for U.S. companies and, as a result, more work for U.S. law firms.” Lawyers say they also expect a lot of legal work will come when the government announces major infrastructure projects in other sectors. “Everything is in need of reform,” Ali says. “Libya has been very isolated.” The revamping of the power sector should be one of the first major projects the government undertakes. “Libya will have a huge power shortage, so we expect that they will want to build more power stations,” Beydoun says. Real estate development and the tourism sector are also expected to yield a lot of work. “Tourism is going to be huge in Libya,” Beydoun says. “I already know of a few American companies who are looking into developing large tourist type of projects like resorts.” Alexia Garamfalvi wrote this story for Legal Times, a Recorder affiliate based in Washington, D.C.

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