Exploration Production Sharing Agreement Libya

Wintershall Dea (formerly Wintershall and DEA) has been involved in the exploration and production of crude oil in Libya since 1958. The Wintershall Aktiengesellschaft subsidiary, a joint venture between Wintershall Dea and Gazprom E-P International, has been operating nine oil deposits on two concessions in the Sirte Basin, about 1000 kilometres southeast of the capital Tripoli, in the municipality of Al-Wahat, since 1966. Since 2008, Gazprom E-P International has held a 49% share. The most important reservoir is the As-Sarah field, near the oasis village of Jakhira. Libya`s oil reserves, estimated at 47.1 billion barrels, are the largest in Africa and are among the largest in the world. Much of these oil reserves are in fields that have not yet been explored in recent years. It is also possible that new fields will be discovered and that technological advances will lead to an increase in the recovery of hydrocarbons that could increase production from existing fields. On 12 December 2019, exploration and production sharing agreements were concluded for Units 91 and 107 (formerly C96 and C97) between Libyan National Oil Corporation (NOC) and Wintershall AG in Tripoli. Wintershall Dea represents more than 120 years of experience as an operator and project partner throughout the E-P value chain. The company employs approximately 4,000 people in more than 60 countries around the world.

The company plans to increase its average daily production from about 590,000 barrels of oil equivalent in 2018 to about 750,000 boe/d by 2023. The EPSA IV treaty is considered to be particularly the global oil industry and the IOCs have been very interested in expressing their desire for a new version of EPSA offering more attractive conditions (Royal Dutch Shell recently stopped exploring under its Libyan licences, as poor exploration performance cannot be economically justified under EPSA-IV conditions). Under EPSA IV, an CIO or consortium of IOCs is usually formed by a joint venture with the NOC. The IOC or consortium conducts exploration work and bears costs for at least 5 years, while the NOC retains exclusive ownership. The joint venture is headed by a committee made up of two representatives of the NOC and an IOC, with decisions taken unanimously. Last June, the National Transitional Council (NTC) (which preceded Libya`s General National Congress) proposed that production-sharing agreements with IOCs be proposed on more favourable terms, to encourage IOCs to invest more money in oil exploration and recovery. However, it also made it clear that such a development would not occur this year. More recently, it has been reported that NOC officials have stated that there are plans to make Libya a more attractive destination upstream, by offering more favourable contractual terms.

Under an EPSA, the Libyan government retains, through the NOC, exclusive ownership of oil fields, while sub-signatory oil companies are considered contractors. Many versions of EPSA have been published since then. The last round of EPSA under the former regime took place in 2005 on a arguably more attractive version of EPSA, “EPSA-IV”, as a post-sanction initiative to invite much-needed foreign investment in the country`s oil and gas sector. The key difference between the different versions of the EPSA is the extent of the commitments made by the government and the IOC with regard to the recovery of development and production costs. In addition, EPSA-IV contracts were awarded on a competitive basis and not on the trading method used in previous rounds. NOC and Wintershall AG, which were converted to EPSA terms, were able to close the deal and committed to signing the agreements. Following the passage of the Oil Act, the Libyan government has carried out numerous renegotiations of concessions previously offered under the original oil law and has succeeded in imposing strict tax conditions on IOCs by taking advantage of favourable market conditions.