Total has reached an agreement with Libya’s National Oil Corp. (NOC) on the French company’s acquisition of a stake in the Waha concessions.
The French company will invest $650 million into the development of Waha, with a $150mn commitment to corporate social responsibility around the area. Total signed a $450mn deal in March 2018 with Marathon Oil, for a 16.33% stake in Waha, although it did not secure approval from NOC. This led to a certain degree of tension.
The agreement on December 10, though, aims to see this smoothed over and includes approval from the Libyan government. Total has said it will invest in fields on the Waha concessions in addition to covering local economic development work, worth $20mn over four years.
Total said it would assist NOC on Waha through providing its technology and expertise, develop the North Gialo and NC 98 fields and support social responsibility programmes in the areas around the oil operations. NOC will oversee the social responsibility work, with Total financing $70 million at the beginning, with another $30mn when North Gialo starts up and another $30mn with NC 98.
Developing the Sirte Basin fields should add around 180,000 barrels of oil equivalent per day, Total said.
A statement from NOC noted approval of Total’s Waha acquisition. NOC’s chairman Mustafa Sanalla said the company had withheld approval initially in order to scrutinise all aspects of the agreement. “In addition, NOC considered the feasibility of NOC or other Libyan entities acquiring that stake, versus what Total could bring to the concessions on a technical level and to the regions adjacent to them through social development. NOC also sought the government approvals necessary to complete the deal.”
Ultimately, the deal with Total was approved. This was because the French company agreed to invest $650mn in developing Waha and the two projects, which Libya would have struggled to match. “The imperative to make funds available in the specified time would impact the net profit and the payback period, as well as conflicting with other government priorities in spending and other investment opportunities available to NOC,” Sanalla said.
The official also noted the $150mn signature bonus for corporate social responsibility.
“Total is satisfied to sign this agreement with NOC, with the agreement of the government of Libya, which definitively endorses our entry into the Waha concessions”, said Total’s chairman and CEO Patrick Pouyanné. “We will engage resolutely with NOC and Waha Oil Company in order to invest, optimise the infrastructure and develop new reserves for the benefit of all parties and notably Libya and the Libyans. The agreement, which further extends our close co-operation with NOC, is yet another milestone in our 60-year history in the country.”
When the French company announced the deal with Marathon in 2018, it said this would provide it with access to more than 500mn boe of reserves and resources, in addition to production of 50,000 boepd. In addition to the production, the deal also gave scope for exploration, with the area covering 53,000 square km. Waha was producing 300,000 boepd in 2018, with Total saying it had now reached 350,000 boepd.
Total’s 2017 production in Libya was 31,500 boepd, rising to 63,000 boepd in 2018 – a figure that includes Waha.
NOC has a 59.18% stake in Waha, while ConocoPhillips has 16.33% and Hess 8.16%. The area is operated by Waha Oil Company, which is wholly owned by NOC.
The French company is facing a similar problem in Algeria, where it has been trying to acquire Anadarko Petroleum’s assets, via Occidental Petroleum. At the time the deal was announced some concerns were expressed from the Algerian government and recent statements from Algiers have bolstered this.
Algerian Energy Minister Mohamed Arkab told the country’s APS news agency last week that Sonatrach would pre-empt the sale. Algeria is due to hold a presidential election on December 12, but this is unlikely to shed much light on the sale question.