Joined: 05 Oct 2005
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By Alessandra Migliaccio and Anthony DiPaola
Oct. 16 (Bloomberg) -- Eni SpA, Italy's largest oil company, plans to jointly invest $28 billion with Libya to expand crude and natural-gas production in the North African country. The 10-year spending program will be evenly split between Eni and Libya's state-run National Oil Corp., Eni said in a statement today. Rome-based Eni said it also agreed to extend existing supply contracts to receive oil from Libya through 2042 and natural gas through 2047. Libya, site of Africa's largest oil reserves, is seeking contracts with foreign companies to develop untapped fields as rising energy prices make it profitable to explore for new sources. The nation is becoming more attractive for investment after the U.S. in 2004 lifted economic sanctions that stunted expansion. ``This is an opportunity to develop a part of the world where investment has been blocked, particularly in the oil and gas industry,'' said Alessandro Avanzi, who helps manage about $350 million in assets at Banca Valsabbina in Brescia, Italy. Eni plans to double capacity at the Mellitah gas-export hub to 16 billion cubic meters a year to help ship the fuel to markets worldwide, it said. The company will increase pipeline capacity by 3 billion cubic meters and build a new gas-liquefaction plant. ``Being able to consolidate our position, for many years to come, in an environment that is again becoming competitive is very important to us,'' Eni Chief Executive Officer Paolo Scaroni told reporters in Tripoli today. Scaroni was set to meet today with Libyan leader Muammar Al-Qaddafi. Further Exploration Eni will also invest an additional $800 million over the next seven years to explore for fuel and conduct geological surveys that may reveal deposits of oil and gas, Scaroni said. Libya wants to increase crude output capacity to 3 million barrels a day by 2013, from 1.8 million now, by bringing new fields on stream and improving recovery from existing deposits, Shokri Ghanem, the head of state-run National Oil Corp., said in an interview in Vienna Sept. 14. The nation is the eighth-largest oil producer of the Organization of Petroleum Exporting Countries and Africa's second- largest producer, after Nigeria. Eni has this year bought supplies from Alaska to Russia and is developing the Kashagan offshore field in the Caspian Sea. The company and its partners developing Kashagan in Kazakhstan are seeking to resolve a dispute with that country's government over cost overruns and delays. Cost Overruns Production at the field, the largest oil discovery in three decades, may not meet a 2010 startup target, and costs have more than doubled to $136 billion, the Kazakh government has said. Adding production in Libya may help boost reserves and output, lessening pressure on the company to bring the Kashagan field on-line faster, said Avanzi at Banca Valsabbina, which has sold most of its Eni shares. ``Eni is working on two fronts now, in Libya and in Kazakhstan,'' Avanzi said. ``If this agreement goes ahead, the seriousness of the impasse in Kazakhstan could be in part overcome.'' The Italian company aims to raise output growth by 4 percent a year on average through 2010. Eni produces about 290,000 barrels of oil and oil equivalent a day in Libya, making it one of the most important countries where the company is present, Scaroni said. ``Libya is the number one country for production for us, much more than Kashagan,'' Scaroni said today. Eni has an 18.5 percent stake in the Kashagan field, which is set to produce 1.5 million barrels of oil a day at its peak. European Strategy Today's agreement fits with European efforts to diversify the source of energy supplies. The European Union is trying to import more gas from Africa and the Caspian to reduce dependence on Russia, which now supplies about a quarter of the EU's needs. Eni last year agreed to extend its supply contracts with Russia's biggest gas exporter, OAO Gazprom over the next three decades to maintain supplies of the fuel into Italy. ``This is an important step for creating energy security and diversifying energy supply sources for our country,'' Italy's Industry Minister Pierluigi Bersani said of the agreement with Libya in a statement today. Italy will gain an additional 3 billion cubic meters of gas through the expansion of the Greenstream pipeline that runs under the Mediterranean Sea to the city of Gela in Sicily. Eni may direct the 5 billion cubic meters of liquid gas from the planned facility to countries other than Italy since there is only one operating LNG receiving terminal in the country. Liquefaction plants cool gas until it reaches liquid form so that it can be transported by ship over distances not linked by pipeline. The liquid is then warmed to return to gas. |
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