Suncor to stay out of Libya while Gadhafi in charge

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Suncor Energy Inc. is siding with international efforts to oust Libya's Colonel Moammar Gadhafi, vowing to suspend operations in the war-torn country as long as the dictator holds power.

The move to abandon the Gadhafi regime comes after Canada's biggest energy company went months without weighing in on the conflict.

The outcome of the civil war in Libya will determine Suncor's ability to regain control of its operations, which include nearly $1-billion of corporate assets and 50,000 barrels a day of oil production. Suncor shut down its business earlier this year and pulled out its employees as war broke out.

On the day Canada officially recognized Libya's rebels as legitimate representatives of the country, Suncor chief executive officer Rick George said the company will only contemplate future work there under a new government.

"We will not go back into Libya as long as the Gadhafi regime is in place," Mr. George said Tuesday.

The statement is a shift in tone for Suncor, whose predecessor companies have worked to curry favour with the Gadhafi regime and which had, until this point, avoided making any partisan comments with regard to the continuing conflict.

In years past, western corporations have expended substantial effort to work with Libyan leadership, both with the heads of the national oil company and the Gadhafi family. In 2005, for example, Petro-Canada, which owned the Libyan assets before being taken over by Suncor, sponsored a Montreal art show by Saif Ghadafi, one of Col. Gadhafi's sons, and hosted a dinner with him in Calgary in 2005.

The advent of civil war created a conundrum, however, since taking a side meant potentially jeopardizing future opportunities to revive profitable assets, especially if a company chose to support the losing side.

Now, with coalition forces pressing forward with a campaign seemingly aimed at ridding Libya of Col. Gadhafi, and Canada's Foreign Minister, John Baird, saying "as a political objective, obviously we'd like to see him go," it has grown easier for industry to see which outcome is likely to prevail.

"As a matter of self-interest, most of the companies have been silent," said Greg Priddy, a global oil analyst with the Eurasia Group. "But because it's clear that one side can't win, and you can't do business with them even if they stay in power for an extended period - which is unlikely - you might as well come out in favour of the other side."

The atrocities ascribed to the Gadhafi regime have also made it difficult for companies to be seen as even tacit backers.

In the past it may have been "more of an uninterrupted business flow that's of interest than taking sides on moral issues" for corporations, said Anthony Seaboyer, director of the Centre for Security, Armed Forces and Society at the Royal Military College in Kingston.

But, "it can hardly be good for your company to not be openly at some point saying [what's happening in Libya]is way too much and we don't want to support this," he said.

Still, having Suncor throw its weight against Col. Gadhafi in some ways increases the political pressure on Canada to effect regime change in Libya, since it now has further economic incentive to do so. If Col. Gadhafi is not removed, one of the country's largest corporations will lose assets and future revenue.

Mr. George also reiterated Tuesday that Suncor may have to take a writedown on its Libyan assets - valued at about $900-million at the end of March - but that no decision has been taken. He added that operations in Syria - where the regime of President Bashar Assad has been brutally cracking down on a 12-week uprising by dissidents in parts of the country - continue "as normal, without change."

Suncor's major asset in Syria is the Ebla partnership, which produces roughly 80-million cubic feet of natural gas a day.

Mr. George's comments came on the same day the Canadian government formally recognized the Libyan rebels as the "legitimate representative" of the Libyan people, joining a global move to legitimize the nascent organization as a government-in-waiting in Libya.

Suncor has a partnership with the Libyan government on a project that produces about 50,000 barrels of oil a day. It also owns an oil terminal in Ras Lanuf, a key port town.

Last month, the company said it is trimming its 2011 production guidance by 5 per cent because of the Libyan crisis. It shut down operations in February and sent home its expatriate work force.

Last year, Libya represented more than 6 per cent of Suncor's production, but it made up just 2 per cent of corporate cash flow because it received only 12 per cent of the revenue from its share of the assets there.