Marathon Oil's potential Libyan sale unlikely to be swift

Fri Jul 26, 2013 1:57pm EDT

* Marathon holds 16.3 pct stake in Waha Oil Company

* Waha Oil Co. as a whole valued at $3.5 billion-source

* Unrest and poor terms likely to reduce pool of interested buyers

By Marie-Louise Gumuchian and Julia Payne

TRIPOLI/LONDON, July 26 (Reuters) - U.S. oil company Marathon Oil Corp is studying the sale of its stake in a key Libyan oil consortium in a sign unrest in the country and limited financial incentives are wearing down foreign firms, sources familiar with the matter told Reuters.

Even though the stake is in one of Libya's most important companies, the sale is likely to be difficult.

The company is part of one of Libya's most important joint ventures, known as the Waha Oil Company, with Libya's state oil company National Oil Corporation (NOC), Hess Corporation and ConocoPhillips.

The company declined to comment on the possible sale.

The consortium has a production capacity of around 350,000 barrels per day and exports the country's main light sweet grade Es Sider.

"Marathon is looking at selling in Libya. There have been talks about it," an oil industry source in Libya said.

The source did not give a reason but cited the general context of the Libyan oil industry with repeated disruptions to the country's production due to protests and strikes.

The asset is unlikely to attract many interested parties due to unrest in the region but also particularities to the asset itself.

"Not aware of anything else being said or who might be interested but I suspect someone comfortable with the regional instability - probably limited to a few contenders," a regional industry executive familiar with the matter said.

Another source close to the situation estimated the value of the entire Waha consortium to be around $3.5 billion currently, but the stake would be a hard sell.

"It's not super attractive because all the barrels are spoken for and the fields are starting to deplete. It will require a lot of investment and the tax regime is not favourable," the same source said.

The country's exploration and production terms, known as EPSA IV, are widely unpopular. Tripoli is expected to announced a new set of terms in early 2014 but the deputy oil minister made clear these would only apply to future contracts, with existing ones left unchanged.

Marathon Oil and ConocoPhillips each hold a 16.3 percent working interest in the Waha Concessions, Hess Corporation an 8.2 percent working interest and the Libyan National Oil Corporation (NOC) holds a 59.2 percent working interest.

In the first quarter, production from Libya accounted for about 7 percent of Marathon's total output.

The state oil company NOC has been struggling to maintain production levels following the overthrow of dictator Muammar Gaddafi in 2011.

Due to unrest, Libyan oil output hit less than 1 million barrels per day in June due to multiple outages, down from its normal level of 1.6 million barrel per day (bpd). It has since recovered but one large field and one oil port remain closed.

Sales of crude oil and natural gas accounted for more than 10 percent of our 2010 annual revenues. The company's revenue in 2010 was $11.7 billion.

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