22 Nov 2021 | 13:26 UTC

Libya approves sale of Hess' Waha stakes to TotalEnergies, ConocoPhillips: Pouyanné

Highlights

8.16% stake will be split evenly by the two companies

Deal will help Waha production grow by further 175,000 b/d

Infrastructure, budget issues slow Libya production recovery

Libya's Government of National Unity has approved the sale of US oil company Hess Corporation's stake in the giant Waha oil concessions to both TotalEnergies and ConocoPhillips, Patrick Pouyanné, CEO of TotalEnergies, said Nov. 22.

Pouyanné confirmed the deal while speaking at the Libya Energy & Economic Summit 2021 in Tripoli on Nov. 22.

Hess Corporation's 8.16% stake in the key oil license will now be split evenly between France's TotalEnergies (4.08%) and ConocoPhillips (4.08%), sources close to the matter told S&P Global Platts.

But the deal has also been attracting some opposition domestically, and with elections just over a month away pressure was mounting on Prime Minister Abdul Hamid Dbeibah to pass the deal.

Deputy Oil Minister Refaat al-Abbar, who chairs the ministry's technical committee for production affairs, had approved the sale over the past few days, sources said.

Representatives at Hess and ConocoPhillips were unavailable for comment.

In a letter dated Nov. 9 written by Prime Minister Dbeibah to Pouyanné, the PM said he welcomed and supported the proposed joint acquisition.

"Your willingness to strengthen the partnership with the shareholders in the Waha fields is well noted in order to meet the challenges facing the development," he said in the letter seen by Platts.

But he asked the two companies to contribute $45 million to a wholly owned government entity that will be designated in the course of the finalization of the transaction agreement.

These funds will be directed towards "infrastructure projects in relation to youth and sports," which would enhance stability and prosperity in the North African oil producer.

This comes as the country is due to hold presidential elections on Dec. 24, but the path to democracy could be fragile as relations between the eastern parliament and the west of the country have not been particularly smooth lately.

Critical concessions

Both TotalEnergies and ConocoPhillips currently have a 16.3% stake in the Waha concessions, which have the capacity to produce almost 400,000 b/d.

With Libyan crude production hovering near 1.2 million b/d in 2021 after years of numerous closures and civil unrest, both companies are eager to expand their operations in the OPEC member state.

These concessions are strategically very important in Libya, located in the prolific eastern Sirte Basin.

The development of Waha's North Gialo and NC-98 oil fields are a priority for Libya, and production from these sites is poised to rise by 175,000 b/d.

Libya's state-owned National Oil Corporation is currently the operator on the Waha concessions and is also involved in the current negotiations.

This comes amid a push by TotalEnergies to boost its presence in Libya's upstream space by increasing its stake in the Waha oil concessions.

TotalEnergies is very active in Libya, with stakes in the Waha, Sharara, Mabruk and Al Jurf oil fields. This follows a tried and tested model for the energy major which has been successful in looking for higher returns in risk-prone areas.

Libya's oil sector is desperate to generate more interest from international oil companies as its recent production recovery has been stymied by a lack of funds.

TotalEnergies, Eni, ConocoPhillips, OMV and Repsol are some of the IOCs present in Libya, but the likes of BP, Shell and ExxonMobil do not currently operate in the OPEC producer anymore.

Libya's production recovery has recently faced some budgetary, infrastructure and technical issues.

A lack of finance allocated for maintenance and repairs caused by political instability has made it difficult for NOC to maintain the assets, keeping a lid on output.

Libyan crude production has averaged 1.14 million b/d so far this year, according to Platts estimates, as it faced issues arising from its exhausted infrastructure and a lack of funds.

A large part of Libya's aging infrastructure has been wrecked by civil war, militant and terrorist attacks, and general neglect over the past decade.

Libya holds Africa's largest proven reserves of oil, and its main light sweet Es Sider and Sharara export crudes are sought after by refineries in the Mediterranean and Northwest Europe for their gasoline and middle distillate yields.


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