TotalEnergies, ConocoPhillips to buy Hess out of Libya

TotalEnergies and ConocoPhillips will buy US firm Hess' stake in Libyan upstream firm Waha Oil and will invest in raising output, according to TotalEnergies' chief executive Patrick Pouyanne.

Speaking at the Libya Energy & Economic Summit, Pouyanne today said the joint acquisition of Hess' 8.16pc stake in Waha was approved by Libya's interim government. TotalEnergies and ConocoPhillips already hold 16.33pc each, and state-owned NOC has the rest.

"This step strengthens the Waha [Oil] partnership… in preparation for new developments and new investments that we are willing to launch in order to increase the output," he said. Around $2bn will be invested in the North Giallo project, to raise output by 100,000 b/d. TotalEnergies will also support a rebuild at the Mabrouk oil field, which was damaged in 2014, so that it might return to rates near 40,000 b/d, and will "build up to 500MW of solar electricity" generation capacity for the Libyan national grid, Pouyanne said.

Waha Oil's output regularly sits in a range of 280,000-300,000 b/d, with production feeding into Libya's Es Sider grade. Exports of that averaged 267,000 b/d in the first 10 months of this year, according to Argus data.

Foreign investment is critical to sustaining and raising Libyan crude production, which Argus estimated at 1.14mn b/d in October — well below the 1.45mn b/d that NOC had targeted by the end of this year. Years of war has led to regular, often severe infrastructural damage in Libya, with frequent shutdowns and restarts at key fields and a lack of opportunities for maintenance leading to pipeline corrosion. Several terminal storage tanks have been destroyed and the country's largest refinery, the 220,000 b/d Ras Lanuf, has been offline since 2013.

NOC has frequently requested higher budgetary allocations for its operations, but efforts to pass a unified spending plan have encountered delays. Libya is scheduled to hold presidential elections on 24 December. In the absence of a fiscal plan, Libya's ambitions to raise crude output are squarely in the hands of overseas operators like TotalEnergies, ConocoPhillips, Spain's Repsol and Austria's OMV.

But today's deal has been met by some pushback, with Libyan 56 parliamentarians saying on 20 November the sale goes against two articles of the north African country's oil and gas law. The acquisition will lead to a "neglect of the oil, which is the source of Libya's livelihood," they said in a petition seen but not independently verified by Argus.

Asked about this, ConocoPhillips said it "does not comment on business development or commercial activities." TotalEnergies and Hess have yet to respond.

TotalEnergies entered the Waha Oil consortium in early 2018 through a $450mn purchase of US firm Marathon Oil's stake, entitling it to production of around 50,000 b/d of oil equivalent (boe/d) at the time. It is present in Libya at the Mabrouk, El Sharara and Al Jurf assets.

By Ruxandra Iordache