Eni, Gazprom agree on Libya, West Siberian gas, and South Stream

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Feb. 18--Russia and Italy officials discussed several oil and gas agreements while Russia’s President Dmitry Medvedev visited Italy, including signing an agreement paving the way for OAO Gazprom to acquire half of Eni SPA’s 66% stake in a consortium developing Libya’s Elephant oil field.

In 2007, Eni SPA and Libya's National Oil Corp. signed a wide-ranging agreement aimed at boosting Libya's oil and gas production, with overall investment estimated at $28 billion over 10 years.

At the time, the two companies said they had defined a new plan of strategic initiatives aimed at exploiting the country's oil and gas potential, especially at the Western Libya Gas Project and the Elephant field (OGJ, Oct. 19, 2007).

In addition to the deal over Elephant field, Eni and Gazprom signed an agreement binding both parties to finalize by Feb 28 a gas sale contract for gas that will be produced in Siberian fields operated by the SeverEnergia joint venture.

Gazprom acquired a 51% stake in SeverEnergia in March 2010 after paying $1.6 billion to Artic Russia BV, 60% owned by Eni and 40% by Enel. SeverEnergia, a Russian-Italian exploration and production company, has operations in the Yamal-Nenets region of Western Siberia and produces 90% of Russian gas.

Apart from signing the two agreements, Gazprom Chief Executive Officer Alexey Miller and Eni Chief Executive Officer Paolo Scaroni also discussed a feasibility study of the sea section of the South Stream gas pipeline.

“Special attention was devoted to the building of South Stream,” Gazprom said. “Specifically, participants in the meeting discussed the drafting of a feasibility study of the sea section, as well as feasibility studies of the gas pipelines on the territory of South and Central European countries.”

Analyst IHS Global Insight, noting that negotiations between the two sides over the gas have taken a long time to complete, suggested the Russians had deliberately delayed the matter in order to win concessions from Eni.

“Perhaps one of the most long-winding and complex reasons for the delay in closing this deal has been the issue of Eni's participation in the South Stream gas pipeline,” IHS Global Insight said, adding that Gazprom is understood to have held out as a precondition.

Contact Eric Watkins at hippalus@yahoo.com.

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