LONDON Oct 25 Libya has blocked efforts by U.S.
company Marathon Oil to sell its stake in one of the
country's top oil ventures by moving to preempt a deal, sources
said, highlighting the struggle investors face in cutting
exposure to Libya's unrest.
Two years of turmoil since the Arab Spring and tough
contract terms have prompted oil firms to reassess their role in
Libya, and U.S. companies appear keenest to leave as they lack
the proximity and infrastructure links that make North Africa
attractive to their European peers.
Sources told Reuters in July that Marathon was considering
the sale of its stake in Libya's Waha Oil Company, which has a
maximum output capacity of 350,000 barrels per day (bpd) and
produces the OPEC member's main light sweet crude grade.
Oil Minister Abdelbari Arusi later said Libya's National Oil
Corp (NOC) could buy Marathon's stake though other companies,
which he did not name, were also interested.
But a senior Libyan oil source said this week that Marathon
had decided against selling the stake after talks with NOC.
Contracts require foreign oil companies to secure NOC
approval for any sale and also give it the right of first
refusal in the event of any sale, the source said.
"The company has changed its mind," he told Reuters.
"Marathon as a partner indicated its desire to sell its shares.
It had talks with the NOC and before receiving approval, I
believe things changed for the company. The last I heard the
deal was off."
A spokesman for Marathon declined to comment.
"We have not commented on any of the rumours and speculation
about our Libya assets, so we do not have anything to offer at
this time," he said.
Another source close to the matter said the NOC had told
Marathon it would pre-empt any deal with its own bid and that
the U.S. company should expect the offer to be below market
"The NOC did not like the idea of Marathon pulling out. They
thought it would send bad signals given the political climate,"
the source told Reuters.
Home to some of Africa's largest oil reserves, Libya has
preempted the sale of a foreign company before, highlighting the
determination of resource-rich countries to maximise their
income and ensure strategic interests are upheld.
In 2009, Canadian explorer Verenex agreed to be bought out
by a Libyan sovereign wealth fund for about $300 million after
Libya blocked a significantly better offer from China National
The source close to the matter said there was some Chinese
interest in the Marathon stake but that talks had not progressed
far before it became apparent that the NOC would preempt any
deal. The source did not identify the potential Chinese bidder.
The Chinese do not have any major oil investments in Libya
although they have become a top buyer of Libyan crude since the
fall of Muammar Gaddafi in the 2011 war. Analysts say China is
keen to expand its presence in North Africa's energy sector.
"If Marathon had come with a good buyer, it might have been
different," said the source. "There are not piles of buyers."
Industry sources had said Marathon's stake sale would be
difficult because the project required investment, terms were
tough and unrest since the 2011 war had brought repeated and
prolonged disruptions to production.
A mix of striking workers, militias and political activists
have blocked several of Libya's major oil terminals for about
three months, resulting in billions of dollars of lost revenues
for the government and foreign oil companies operating there.
In the first quarter, production from Libya accounted for
about 7 percent of Marathon's total output.
But Waha has been among the oil operations most heavily
affected by the blockade of Es Sider, Libya's largest oil
terminal, which has been closed since July.
Marathon and ConocoPhillips each hold a 16.3 percent
working interest in the Waha concessions, Hess Corp.
holds an 8.2 percent interest and Libya's NOC 59.2 percent.
Marathon's exit would have followed that of ExxonMobil
, which said last month the security situation no longer
justified a big presence, and Royal Dutch Shell, which
last year abandoned two blocks after disappointing results.
But unlike those majors, which were at the exploration
stage, Marathon was a stakeholder in an established production
company. Analysts said its withdrawal would have sent a more
negative signal as the government struggles to bring production
back up to its 1.5 million bpd capacity.
Production has stabilised at about 600,000 bpd, an NOC
official said this week, and talks are continuing to end
protests that have seen eastern ports remain shut.
Marathon has sought to sell other assets, including its
stake in an offshore Angolan field, as part of efforts to shore
up its balance sheet and fund other projects.