Leadership and Democracy LabWestern Social Science

Canadian Companies in the Libyan Energy Sector

Team Leader: Michael Brown

Analysts: Graeme Allison, Hannah Barltrop, Alli McDonald,

Lucas Tersigni, Alycia Wettlaufer

Currently, the political relationship between Canada and Libya is restraining trade. Since 2011, Canada has imposed an arms embargo, asset freeze, restricted exports and imports, and technical assistance prohibitions. These sanctions, enacted as a requirement by the United Nations Security Council, means that they are unlikely to be lifted until Libya’s political issues are resolved. The government of Canada has even closed its embassy in Tripoli as of 2011 because of the political strife in Libya; it remains closed to this day. Economic interactions between the two countries consists mostly of Canadian aid sent through various institutions such as the International Monetary Fund and the Libya Capacity Deployments Initiative to support democratic elections and the Libyan government’s recovery. Libya is Canada’s second largest recipient of investment in Africa. Despite this, Canada’s exports to Libya are decreasing every year. In 2014, Canadian exports to Libya totaled CDN $78.7 million which was down from CDN $116.1 million in 2013. Canada’s imports from Libya have seen an even more dramatic decrease. Canada’s CDN $10.2 million in imports from Libya have decreased from CDN $80.5 million in 2013.

Canadian imports and exports to Libya will not return to normal levels until the political situation in Libya becomes stable. Until then, the trading relationship between the two nations will be strained but some Canadian companies remain.

            SNC-Lavalin is a Montreal based energy company, founded in 1911. It is one of the leading engineering and construction groups in the world. They operate mainly in the oil, gas, mining, and infrastructure industries. SNC-Lavalin has a long history of operations in Libya and currently holds construction contracts there worth well over CDN $1 billion. Before 2011, The Gaddafi government contracted SNC-Lavalin to build a prison, a new airport in Benghazi, and the great manmade river pipeline. However, the 2011 Arab Spring movement in Libya effectively halted operations and has not resumed since.

            Currently, the Canadian government is investigating  SNC-Lavalin for fraudulent activity. The investigation includes allegations of embezzlement of funds and bribery relating to its contracts with Libya from 2001 to 2011. The hearing for this case is set for September 2018. SNC-Lavalin’s domestic division has since released a statement of admission to the wrongdoing, but also stated that the executives involved have left the company. However, SNC-Lavalin’s international division has already been found guilty of bribing Saadi Gadhafi in order to win lucrative construction projects in Libya by Switzerland’s Federal Crime Court. The former CEO of SNC-Lavalin, Pierre Duhaime, faces charges of fraud, conspiracy to commit fraud, and forgery in relation to his company’s contract to build McGill University Health Centre’s new $1.3 billion hospital.

            Sonde Resources Corporation (Sonde) was an energy company committed to the production and expedition of natural gas and oil in Western Canada and North Africa. However, on February 2nd, 2015, the company voluntarily filed for bankruptcy with the government of Canada and is now obsolete. Preceding the bankruptcy, Sonde was highly entangled in a 768,000-acre license under the control of the Joint Oil Block, which was equally owned by Tunisia and Libya. The block stretches over the maritime boundary in the Gulf of Gables and is very close to several large oil and gas fields. Most likely, the Joint Oil block holds intimidating amounts of future potential oil and gas reserves for any companies involved, as there are only a small number of wells drilled in this area. Information regarding this venture is very limited.

             Accordingly, the actions of Sonde in Libya were extremely limited due to sanctions placed on Libya by the Canadian government. The political and civil unrest due to the civil war raging within the country proved further difficulty in obtaining accurate information of the current status of energy resources available within Libya. Consequentially, all of Sonde’s Libyan resources and information relating to the current status of available energy resources in Libya in limited.

            Suncor Energy (Suncor) is another Canadian energy company based in Western Canada that has ties to the Libyan energy sector. Originally, Suncor acquired its assets in Libya through its partnership with Petro Canada (Petro) in 2009. Petro obtained ownership of oil and gas assets through the procurement of Veba Oil – a German energy company – in 2002. Suncor is involved with another major operation in Libya known as Harouge Oil – with a 49% working interest alongside the Libyan oil company in the joint venture.  Altogether, the production of oil by Suncor and affiliates of Suncor have been negatively affected by the unrest present in Libyan society as of the fall of Gaddafi.

            Following the Libyan Civil War, Suncor has experienced an intense decrease in both production and net earnings. Before the 2011 Libyan Civil War, Suncor was producing 34,700 barrels per day. Initially following the 2011 uprisings, Suncor shut down operations temporarily from the end of 2011 to the beginning of 2012. The instability within Libyan society both on the political and civil stage has resulted in the complete cessation of Suncor’s operations in Libya since 2015. The company has yet to state whether they will be returning to normal operations.

            Caradan Chemicals (Caradan) is a Canadian owned corporation that functions as an independent manufacturer and distributor of chemicals to oil and gas producers. Before the fall of Muammar Gaddafi, Caradan improved trade and investment with Libya when the then president renounced weapons of mass destruction and began to welcome western countries and companies into Libya. It was around this time that the Canadian government became very invested in Libya’s future, especially in the energy sector arena of Libya. However, following the downfall of Gaddafi in 2011, Caradan removed all its expatriate workers from Libya due to the civil and political unrest following said downfall. Although Caradan still has an office based in Tripoli, only local people staff the office. 

            Sonde Resources Corporation, Suncor Energy, and Caradan Chemicals are all Canadian energy companies that have endured set backs due to the political and civil turmoil evident in Libya since 2011. The political situation has also affected SNC-Lavalin, a company involved in building infrastructure. These companies rely on the Libyan energy sector to provide safe and reliable methods of obtaining both oil and gas. However, since the 2011 uprisings in Libya, these companies have deteriorated either partially or completely (as in the case of Sonde). Uncertainty and unrest fill the Libyan state on both a political and civil stage, which ultimately affects Canadian investors, especially in relation to the Libyan energy sector. Much like Canada’s trading relationship with Libya, energy sector relations between these two countries are also heavily tied to the political circumstance that the Libyan government is currently facing.