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Eni Lobbies to Keep Oil Dominance in Libya After Qaddafi

By Alessandra Migliaccio
August 24, 2011 12:11 PM EDT
The company logo displayed on the ENI headquarters in Rome, Italy.
Photographer: Chris Warde-Jones/Bloomberg
The company logo displayed on the ENI headquarters in Rome, Italy.

Eni SpA (ENI), Italy’s biggest oil company, is lobbying rebel leaders to hold its position as Libya’s top energy producer after the end of Muammar Qaddafi’s 42-year regime.

Eni has been in contact with rebel groups throughout the conflict to ensure it doesn’t lose ground to French, U.K. and U.S. companies trying to take advantage of their countries’ air strikes against Qaddafi’s forces, said a person with knowledge of the company’s strategy, declining to be named because the information is confidential.

France’s Total SA (FP), which gets 2.5 percent of its global production from Libya, is seen as a particular threat due to France’s leading role in rallying the international community to the rebel cause, the person said. Eni has been in the country since 1959 and got 13 percent of its revenue there before the conflict.

“If and when Libya opens up for business again, Eni needs to be well positioned and the market will look at that closely,” said Patrizio Pazzaglia, head of financial investments at Bank Insinger de Beaufort NV in Rome, who holds Eni shares. “Libya’s high quality crude was an important asset for the company and I’m sure they will work hard to guard it.”

Eni rose 0.5 percent to close at 13.46 euros today in Milan. The shares have gained 7.9 percent this week after rebel fighters reached the capital, signaling a possible end to the six-month conflict.

France First

Libyan National Transitional Council leader Mahmoud Jebril will fly to Paris to meet French President Nicolas Sarkozy today and will meet with Italian Prime Minister Silvio Berlusconi tomorrow.

France, which was the first country to recognize Libyan opposition leaders and led efforts to launch air strikes against Qaddafi, has also been lobbying rebel forces to ensure its companies are not forgotten once new contracts start getting assigned, according to a person familiar with the negotiations, who asked not to be named because the talks aren’t public.

“Sarkozy invested a lot in this venture and now he needs to show his voters France will get something out of it, so that’s where Eni’s concerns come in,” said Nicolo Sartori, an energy and defense analyst at Rome’s Institute for International Affairs. “I don’t think anyone will touch old contracts because international law protects them, but new ones are up for grabs.”

France has held a leadership role from the start and wants to “remain at the forefront” of initiatives to rebuild Libya, government spokeswoman Valerie Pecresse told reporters in Paris today.

‘Positive Future’

Eni Chairman Giuseppe Recchi said yesterday in an interview he was confident any new government would honor pre-existing agreements. While he was unable to say when production will resume, Recchi said an end to the conflict with Qaddafi would be “very positive.”

Chief Executive Officer Paolo Scaroni sees a “positive future for Eni in Libya,” according to an interview with Corriere della Sera published today. Eni has a “special” relationship with the rebels as it was the first foreign company that met their representatives in Benghazi on April 3, he said.

The company has said it may take about a year to restore Libyan oil output fully and two or three months to bring back full gas flows. Eni’s oil and gas volumes in Libya have fallen to about 50,000 barrels a day of oil equivalent from 280,000 a day before the conflict.

‘Post-Qaddafi Scenario’

“We aren’t yet in a post-Qaddafi scenario. That will come when military operations have ended,” Franck Louvrier, a spokesman for Sarkozy, said by telephone.

Total, which produced 55,000 barrel a day of crude in Libya, said it is monitoring events to determine when a restart may be possible. A spokeswoman declined to comment further on its plans in Libya.

Other companies that have operations in Libya and may be interested in gaining more access to Africa’s largest known oil reserves include London-based BP Plc (BP/), Houston-based ConocoPhillips (COP), BASF SE’s Wintershall unit, Madrid-based Repsol SA, and Austria’s OMV AG. (OMV)

Repsol Finance Director Miguel Martinez said on a July 28 conference call that the company’s Libyan assets are intact and its staff are ready to return to the country once the conflict has ended. It will take the company up to four weeks to restart production, he added.

Oil-Revenue Dependent

The new Libyan government’s “top priority” will be to ensure enough stability to allow the resumption of production “in order for Libya to start earning the oil export revenue on which it almost totally depends,” IHS Senior Middle East energy analyst Samuel Ciszuk wrote in a note.

Eni’s most important field in Libya is the Bahr Essalam deposit off the coast near Tripoli. Started six years ago, it produced about 122,000 barrels a day of gas and associated liquids for Eni in 2009, according to a report on the company’s website.

The company’s other major fields in the west of the country include Wafa, south of Tripoli, which pumped 88,000 barrels a day in 2009. Libya produced more than 1.5 million barrels a day before the start of the civil war in February.

To contact the reporter on this story: Alessandra Migliaccio in Rome at amigliaccio@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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