Germany’s Wintershall Dea cautiously watching Libya as it eyes hydrogen
Posted – 14th March 2021
German exploration and production company, Wintershall Dea will adopt a “wait and watch” approach to Libya, despite the lifting of a blockade in the North African state and a surge in production. The producer also sees great potential in hydrogen as a fuel to combat climate change.
“I think we still have to see proof that there is more stability. I appreciate that it’s a positive development that the blockade of the terminals has been lifted, and that there is a new government in place preparing for elections but it’s it’s all very fragile in Libya so I would still tend to be cautious,” Mario Mehren, chief executive of Wintershall Dea told The National in an interview.
Wintershall Dea, a subsidiary of the world’s largest chemicals company BASF, has been operating in Libya since 1958. The company also operates in Egypt and has a 10 per cent stake in Abu Dhabi’s ultra-sour Ghasha concession. Wintershall Dea is working alongside Adnoc, Lukoil, Eni and OMV to raise production from the fields to 1.5 billion cubic feet per day of gas and 120,000 barrels per day of crude and high-value condensate by 2025.
Libya, a key Opec producer has resumed production following months of blockade after a peace deal was brokered between warring factions in the country. The North African state could see production reach 1.45 million barrels per day by the end of the year, the chairman of the National Oil Corporation, Mustafa Sanalla told Bloomberg last week. Libyan production is currently at 1.3 million bpd, with further increases contingent on the NOC receiving its annual budget with security provisions at its oil infrastructure.
Libya “is close to our heart”, Mr Mehren said, adding, “but it’s not moving the needle in terms of in terms of Wintershall Dea’s overall production.”
During the blockade imposed by Field Marshall General Khalifa Haftar, Wintershall Dea managed to see production continue from its offshore Al Jurf field, which it operates with the NOC and French energy company, Total.
“There the production is on a very stable basis,” Mr Mehren said.
Last year, the German company transferred the operatorship of some of its onshore fields in the Sirte basin to a joint venture led by the NOC.
“This handover happened in October and we have seen first liftings since then, so production is up and running again,” the chief executive said.
Mr Mehren declined to specify the volumes produced by Wintershall Dea onshore, but said “what can be produced is currently produced.”
Wintershall sees “big potential” for the development of hydrogen, particularly from large reserves of natural gas in Russia.
The company will prioritise the development of the resource as part of its efforts to reach net-zero emissions by 2030.
“There is a significant potential for German-Russian cooperation in CCS [carbon capture sequestration] in using the depleted reservoirs and their infrastructure in Western Siberia as well as in the exploration and use of potential aquifers in Eastern Siberia,” Mr Mehren said.
The German company posted a loss of €1.33 billion ($1.6bn) in 2020, which is more than double the deficit it registered the year before.
Wintershall Dea plans to spend €1bn to €1.1bn, with €200 million to €350m allocated to exploration.
“It’s going to be dedicated to a large extent to Norway and to Mexico,” he said.
The company sees significant potential for discovery in the southern side of the Gulf of Mexico, following discoveries in the Polok and Chinwol prospects.
“We are basically looking into our existing portfolio and optimising that, we are not planning to go into any new countries,” Mr Mehren said.
The company plans to increase its production to 620,000-640,000 boe/d from an average of 623,000 boepd last year . Wintershall Dea will operate on the basis of a conservative range of $40-55 per barrel even though prices are 75 per cent higher from November, and are currently trading close to $70 per barrel.
Mr Mehren cited “volatility and uncertainty” and said even if prices were to average $60 per barrel, the company would only benefit from that.
Wintershall Dea, which merged with Dea, owned by Russia’s LetterOne in May 2019, is still considering an initial public offering this year. It had initially targeted a listing by the second half of the year, possibly in Frankfurt.
The company is “prepared for an IPO” but the decision to go public will be made by shareholders, BASF and LetterOne, Mr Mehren said.