Middle East Economic Survey
VOL. LII
No 10
9-Mar-2009
LIBYA
Libya Pressing Oasis Group And Wintershall To Accept Tighter E&P Terms
Libya says that the remaining international oil producers that have yet to update their oil exploration and production (E&P) contracts are dragging their feet about doing so. The firms are Germany’s Wintershall and the three US companies, ConocoPhillips, Hess and Marathon, that together make up the Oasis consortium. Libya’s state-run National Oil Corporation (NOC) persuaded all its other international partners to accept a lower share of production in return for renewing their contracts and permission to ramp up production at the fields they operate. But most of them agreed to do so before oil prices plummeted last year. In an Arabic statement published on its website on 28 February, NOC indicated that Wintershall and the Oasis Group, which together operate around 470,000 b/d of Libyan crude production capacity, were resisting its proposals.
The Libyan Oil and Gas Council will “continue to negotiate with the oil companies that are still delaying the approval of the contractual amendments proposed by NOC to improve the terms of the contracts,” said the statement, which identified the four companies by name.
NOC’s desire to amend these contracts derives from its policy, initiated with Italy’s Eni in October 2007, of getting all international operators in Libya to cede a greater share of production to the state and commit to multi-billion dollar development plans, in an effort to capitalize on higher prices and raise Libya’s crude production from around 1.8mn b/d to 3mn b/d. After renewing their old contracts and migrating them to the new EPSA-4 model, Eni expects to hike its Libyan gas output, while Occidental, OMV, Repsol-YPF and PetroCanada together plan to raise oil production by about 400,000 b/d (MEES, 17 November 2008). Unlike many of these firms, the Oasis group returned to its Libyan concessions in December 2005, and extended its concessions by 25 years at that time, prompting some speculation that it might not have to renegotiate its EPSA contracts.
Waha Development Project Kicks Off
How much Wintershall hopes to raise production from its oil fields in Blocks NC-96 and NC-97 in the Sirte Basin, which were producing around 120,000 b/d last year, is not currently known. But Marathon said at an investors meeting in March 2008 that it expected to raise output from the Waha concession, also in the Sirte Basin, to as much as 600,000 b/d over the next 10 years, from existing levels of around 350,000 (MEES, 14 April 2008). Just three days after publishing the statement about Oasis and Wintershall delaying their approval of NOC’s contract proposals, the Libyan firm said that the implementation of phase two of the Faregh field development project had begun.
Faregh Phase 2 is the first of four major development projects that the Oasis group has identified in its plan to hike oil and gas output at Waha. NOC said that this phase involves linking gas producing wells and installing surface equipment for the treatment of around 180mn cfd of natural gas, and building oil extraction facilities with an estimated 15,000 b/d of production capacity. The field is due to produce 250mn cfd of gas when Phase 2 is completed, which Marathon said last year would be in 2010. North Gialo is the next project due on stream, which according to Marathon could potentially add another 100,000 b/d to crude production. But this and other development plans at Waha may be directly conditional on the Oasis group agreeing to NOC’s strict new terms.
Copyright MEES 2009.
