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Workers work on a pipe at night on the construction site of the Great Man Made River at North Jabal Hassouna in May 2000 in Libya. (Reza/Reza/Getty Images)
Workers work on a pipe at night on the construction site of the Great Man Made River at North Jabal Hassouna in May 2000 in Libya. (Reza/Reza/Getty Images)

Cloud of uncertainty hangs over Canadian business deals with Libya Add to ...

For the group of Canadians drawn to the African desert by the intoxicating scent of profit in recent decades, Libya was a land of promise.

Its sandy stretches hid vast reserves of oil. Its urban centres and ambitious development dreams burst with opportunity for builders. Its attempts at economic liberalization helped mask the realities of working under an odious regime.

But long before revolutionary war broke out in the Saharan dictatorship, threatening billions of dollars in Canadian assets and potential revenues, it became clear that Libya's promise was obscured behind a fog of mysterious relationships, cash payoffs, ill-defined authority and unpredictable bureaucracy.

That the country was led by a bizarre colonel and his family only added to the unpredictability of working there - and only helped further blur ethical lines for a small group of corporations whose Libyan ambitions led them to contend with a business culture in which bribes, side deals and enigmatic "consultants" held long tenure.

Concern about ethical lapses was only magnified by the sheer magnitude of money at play. Petro-Canada, the former Crown corporation that has now been folded into Suncor Energy, paid a $1-billion signing bonus in 2007 to maintain access to oil and gas lands in the country - a payment that prompted fresh questions earlier this year when it was arose as part of a Wikileaks dump.

Other oil and gas companies sold millions of dollars of drilling rigs and other equipment to Libya, while engineering company SNC-Lavalin Group Inc. signed deals worth well over $1-billion.

Now, the ultimate outcome of Canadian investments in Libya may take months - perhaps years - to fully emerge, as the fate of the country's leadership hangs in the balance. That uncertainty also places a cloud over foreign investments - including those by Suncor and SNC-Lavalin - that have taken decades to build up.

"Everybody knew that these regimes, the Egyptian regime and the Libyan regime, were tough places to be," said Walid Hejazi, an associate professor of international business at the University of Toronto. "But they were normalizing relations so there was hope that things would improve …There is no question [the upheaval]is going to impact these companies."

The impact is already being felt. On Friday, SNC-Lavalin said it effectively suspended nearly $900-million worth of Libyan projects and that earnings for the rest of the year will be flat because of events in Libya and elsewhere in North Africa. Suncor has offered little official comment on how its investments have fared - although a manager with the company's Libyan joint venture in Tripoli said production has fallen by 25 per cent.

'A reliable partner'

It was Col. Moammar Gadhafi and his big dreams and unpredictable nature - funding international terrorism for years and then renouncing weapons of mass destruction - who opened the door to western businesses.

Some of the groundwork had been laid long before he took control in a coup more than 40 years ago. Mobil Oil began exploring for oil in Libya in 1955. The first wildcat well was struck the following year, and the world's major oil powers rushed in. Libya's crude was not only abundant, it was light, it was sweet and eminently desirable.

The overthrow of the Libyan monarchy by then-Capt. Gadhafi and other officers in 1969 In 2002, Petro-Canada bought the former Mobil Oil assets, as a part of a $3.2-billion purchase of another company. Petro-Canada was in early. The following two years brought about a major global welcome of Libya. World leaders soon came flocking to the colonel's tent compound in Tripoli, including then Prime Minister Paul Martin who made a private visit to the Libyan leader in 2004 and then announced a string of contracts for Canadian companies.

One of the most lucrative cash cows for western companies has been Col. Gadhafi's grand plan to ship water 4,000 kilometres from reserves in the southern part of the country, across the Sahara to Tripoli and other cities along the Mediterranean coastline. He first unveiled the project in 1983, dubbing it the "Great Man Made River" and promising that it would transform all of North Africa by turning dry desert into rich farmland.

Hyperbole aside, Col. Gadhafi took the project seriously, devoting huge portions of state oil revenues to it and bringing in engineering firms from around the world to make it happen. Those firms included SNC-Lavalin which started as a subcontractor on a small part of the project in 1986. Over the next decade the Montreal company won more work and then got a break in 2001 when one of the project leaders, South Korea's Dong Ah, declared bankruptcy. SNC-Lavalin and others rushed to fill the void and the Canadians ended up winning contracts worth more than $1-billion, the latest coming last October. It also won bids to build an airport in Benghazi and design a prison in Tripoli.

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