LONDON (AP) – American oil companies have chafed for more than 17 years at U.S. sanctions that forced them to abandon prolific oil fields in the Libyan desert.

Now, after Libya’s surprise agreement to abort its programs for weapons of mass destruction, the Americans can foresee their return to a country of promising and barely explored petroleum wealth.

The Libyan government, desperate to boost its oil exports, is eager to have them back. Libya now produces less than half of its 1970 peak of 3.3 million barrels a day. With fresh investment, analysts say it could once again become a leading producer.

The announcement Friday of Libyan leader Moammar Gadhafi’s diplomatic concession could provide the opening that both sides have been seeking. White House officials say that if Gadhafi keeps his promises on dismantling his weapons programs, the sanctions in place since 1986 could be lifted within months.

“This recent development has certainly made things more positive, and the outlook is more promising for a potential lifting of sanctions sooner rather than later,” said Occidental Petroleum Corp. spokesman Larry Meriage.

Occidental, based in Los Angeles, is one of four U.S. oil majors that withdrew from Libya in June 1986, two months after U.S. jets bombed one of Gadhafi’s palaces in retaliation for the deaths of two U.S. soldiers in a bombing in Germany.

Occidental made several large discoveries there, with reserves totaling almost 4 billion barrels, and Libya’s light, low-sulfur crude commanded a premium on world markets.

“These discoveries really launched Occidental into the international arena. Before that we were primarily a domestic oil company,” Meriage said.

Three of Occidental’s rivals – Amerada Hess Corp. of New York and the Houston-based companies Marathon Oil Co. and Conoco Inc. – produced oil jointly as the Oasis Group, together with Libya’s state-run National Oil Co. Before sanctions took effect, the partners pumped about 850,000 barrels of oil a day.

All four U.S. companies say they have abided by sanctions against the North African country but suggest they would hurry back there if given the chance.

Despite Libyans’ resentment at U.S. sanctions, they never seized the property and installations that the Americans oil companies left behind. “They have always said, ‘Come back. We are looking after your assets.’ They did not nationalize them,” said Manouchehr Takin, an analyst at the Center for Global Energy Studies.

in London.

Several foreign competitors are active in Libya today, including Italy’s ENI and French heavyweight Total. Libya pumps about 1.5 million barrels of crude a day, or 2 percent of world supplies, and is the second-largest oil producer in Africa behind Nigeria.

However, sanctions have taken a heavy toll. A U.S. law passed in 1996 – the Iran Libya Sanctions Act – has stifled even foreign investment by threatening sanctions against any company investing more than $40 million in Libya’s energy industry in any one year.

From 1995 to 2002, Libya had just one-fourth the number of oil wells drilled in neighboring Egypt, and two-thirds the number of wells in Algeria. Its proven reserves are estimated at a modest 30 billion barrels, compared with 113 billion barrels in Iraq, but analysts say this reflects a dearth of exploration.

Wood Mackenzie Consultants in Edinburgh, Scotland describes Libya as “highly under-explored” and having “excellent” potential. Exploration would accelerate if the United States ended its embargo, and advanced drilling techniques would enhance recovery rates at Libya’s aging oil fields, it said.

Without sanctions, Libya might also be able to develop its natural gas reserves and resume its neglected effort to export liquefied natural gas.

The likely inflow of post-sanctions investment should enable Libya to increase its daily oil output to more than 2 million barrels within a few years, Takin said. Such growth would create a headache for Libya’s fellow members in the Organization of Petroleum Exporting Countries, as Libya’s current OPEC production quota is 1.3 million barrels a day.

Because Libya values the technical expertise and financial resources of U.S. firms, some analysts argue that Tripoli has dragged its feet in negotiations with non-U.S. oil companies.

U.S. companies are interested in more than just picking up where they left off, said George Beranek of PFC Energy, a Washington consultancy.

“It’s not just getting back into these assets,” he said. “It’s having them as a platform for further growth in the country. That’s also important.”

AP-ES-12-23-03 1605EST

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