Undercutting of Libya Curbs by U.S. Firms Seen

TRIPOLI, Libya — Four major American oil companies operating here have stopped shipping Libyan crude, but in effect they have undercut President Reagan’s embargo by “lending” or selling their production to other oil companies, diplomats and industry sources said Wednesday.

West German, Italian, Libyan and other oil companies have taken over the roughly 20% share of production involving American firms, according to the sources, who requested anonymity. They said this allows Libya to maintain its output of 1.2 million barrels per day.

The arrangements technically comply with the President’s executive order to end all American transactions with Libya but violate its spirit, the sources said.

Approval Called Imminent

The deal on passing along production involves Occidental Petroleum, Amerada Hess, Conoco and Marathon and is now awaiting what the sources described as imminent State Department approval.

(Los Angeles-based Occidental Petroleum, with the largest installation, confirmed that it is not exporting oil from Libya, but a spokeswoman said the company would not comment on shifting of the production to other companies. The State Department also refused to comment and the other companies could not be reached.)

This arrangement puts the Administration in “an embarrassing situation,” a source said, since it follows the European Communities rejection on Tuesday of U.S. demands that its members embargo Libyan oil.

“The net result is that the action of the American companies,” a Western oil official said, “is having absolutely no effect on Libya’s overall income from oil export.”