* Exxon mostly involved in offshore Libya drilling
* Not clear if it will abandon Libya blocks
* Shell suspended Libya drilling last year
By Lin Noueihed
LONDON, Sept 17 (Reuters) - ExxonMobil, the world'slargest publicly-traded energy company, said on Tuesday it wouldcut back its staff and operations in Libya as growinginstability no longer justified a major presence.
While it is not a major investor in Libya's oil and gassector, Exxon's move highlights growing concern amonginternational oil companies that the returns on offer in Libyamay not justify the security and political risks that have grownsince the 2011 uprisings that swept the Middle East.
"The security and business situation means we can no longerjustify maintaining a large office presence in Libya,"ExxonMobil spokesman Patrick McGinn told Reuters.
"We are not giving up on seeking to develop a business inLibya. There are many ways in which ExxonMobil could add valueand we welcome discussion with Libya of any mutually beneficialinvestment opportunities that may arise once the securitysituation stabilizes."
The U.S.-based oil firm, which is mostly involved inoffshore exploration in Libya, declined to say how many staffwould leave or to give more details about its decision.
Strikes by disgruntled workers, separatists and localmilitia have all but paralysed Libya's oil exports over the pasttwo months, pushing up global crude oil prices and costingWestern companies such as Italy's Eni and U.S. Marathon hundreds of millions of dollars in lost revenues.
ExxonMobil was one of several international oil companiesthat scrambled to return to Libya after United Nations sanctionsimposed on Muammar Gaddafi's government over the 1988 Lockerbiebombing were lifted in 2003.
In bidding rounds opening up territory that had been offlimits for years, oil companies accepted some of the industry'stightest exploration and production terms.
OTHERS WARY
OPEC member Libya has reserves of over 40 billion barrelsbut analysts have warned that some of the toughest terms in thebusiness, coupled with security concerns, could deter investorsand the oil minister said last year the country was seeking toimprove terms for foreign companies in the next round of bids.
Gaddafi was overthrown in 2011 following months of war andsanctions but Libya's new rulers have struggled to impose theirauthority in a country awash with guns and local militia.
Royal Dutch Shell suspended drilling and abandonedexploration on two Libya blocks last year due to disappointingresults and other firms have postponed exploration due toconcerns about safety since the 2011 war.
Marathon is considering the sale of its stake in a keyLibyan oil consortium, sources told Reuters in July.
It was not clear if Exxon would abandon the blocks it won inLibya as it scales back its presence in the country.
In 2005, ExxonMobil was awarded a license to exploreContract Area 44 offshore in the Cyrenaica Basin to theresource-rich east of Libya, returning to the North Africancountry for the first time since the 1980s.
Two years later, ExxonMobil said it was planning to greatlyexpand its operations in Africa and named Libya as one of thepromising new markets on the continent.
In 2007, it won licenses to explore in Contract Areas 20 and21, in deep waters off the central Sirte Basin.
Deepwater drilling began in 2009 but the following year,Exxon announced that its well was not commercially viable.
Libya took the first steps towards restarting oil outputfrom some Western fields on Monday but production in the east ofthe country remains largely offline.
