RWE faces US sanctions threat

The US opposes investment in Libya's petroleum sector

The US has warned the German utility group RWE that it could face sanctions because of a deal to explore for oil and gas in Libya.

The US State Department said it was examining the contract to see if it broke the Iran-Libya Sanctions Act, passed in 1996.

Under this law, the US can punish foreign firms that invest more than $20m a year in the energy sectors of Iran or Libya.

"The United States policy has long been opposed to investment in the petroleum sector of Libya," State Department spokesman Philip Reeker said.

Cost controversy

He said Washington would be raising its concerns with the company and the German government.

RWE says its five-year contract does not break the limit.

"The agreed work program will call for a total of approximately $56m in capital spending over a five-year period, i.e. significantly less than $20m dollars per annum," it said in a statement.

The Financial Times reported earlier that the deal signed at the end of May with the Libyan National Oil Corporation is worth $64m.