Wintershall’s Sirte Basin concessions converted to EPSA IV format

On 12 December, the National Oil Corporation (NOC) announced that it had signed two exploration and production sharing agreement (EPSA VI) with the German energy company Wintershall Aktiengesellschaft for Areas 91 (previously named Area 96) and 107 (previously named Area 97) in the Sirte Basin. Under the agreement, Wintershall is to carry out exploration activities at its own cost and bear half the development cost, as well as provide 150 million USD for corporate social responsibility and sustainable development programmes and projects.This agreement between the NOC and Wintershall marks the end of several years of dispute between the two organisations, which had led Wintershall to consider exiting the country in September 2019. Wintershall operates 8 fields near the Jakherra and Jalu oases in the Sirte Basin, most notably the Sarah field, and has been in Libya since 1966. Wintershall's production in Libya had averaged around 160,000 bpd but by August 2017 it had dropped to 65,000 bpd and hasn’t risen much above that since. This agreement comes just days after the NOC approved Total’s acquisition of Marathon Oil Libya Limited’s shares (16.33%) in the Waha Concessions, a process initiated in March 2018 by Total and hotly contested by the NOC ever since. The NOC has now solved its main outstanding disputes with IOCs in Libya.The NOC’s agreement with Wintershall is a positive development which is likely to improve investor confidence in Libya’s oil sector and the wider operating environment. The NOC’s decision has likely been driven by the increasing need to secure international investment and expertise to be able to deliver its ambitious 2.1bpd by 2024 plan, coupled with the deteriorating financial and operational conditions in the oil sector due to the ongoing conflict in Tripoli. It is unlikely that this new arrangement with Wintershall will lead to an immediate increase in production but it is possible that production from these fields will increase in the short- medium term.