ENI signs deal for joint oil and gas projects with Libya

Oct 16, 2007 02:00 AM

ENI, Italy's biggest oil and natural gas company, said it signed an agreement with the Libyan national oil company to jointly develop hydrocarbon projects in the North African country and extend existing contracts.
“We have managed to guarantee that existing contracts remain ours for the next 25 years," ENI Chief Executive Paolo Scaroni told. "This means our production (in Libya) will increase strongly, not drop."

The Rome-based company said the overall joint investments associated with the agreed work programs are worth about $ 28 bn over 10 years.
"This is a good deal for all involved," Shokri Ghanem, chief executive of Libya's National Oil Co., told. "It's an example of how we can work together." The ENI CEO said the investments will be equally split between the two companies.

The two companies agreed to convert existing contracts with a renewed duration of 25 years starting from January 2008. The new expiry dates are 2042 for oil contracts and 2047 for gas contracts.
"The newsis positive, as the oil and gas contracts were nearing their end, but with this deal we now know that they are safe for many years," said Roberto Mascarello, a Milan-based analyst with Kepler.

ENI is Libya's biggest foreign oil operator and has been present in the country since 1959. The two companies will focus their efforts on maximizing the recovery of their existing oil fields. Scaroni said ENI also will be able to explore fields close to existing ones.
Scaroni said ENI will pay a fee of $ 1 bn to NOC for extending the contracts. ENI will also pay up front a $ 500 mm debt it had to NOC that previously was to be paid in instalments. ENI and NOC will expand the gas export capacity at the Mellitah facility to 16 bn cm a year from today's 8 bn cm.

The Italian company said the expansion will be achieved through a 3 bn cm a year upgrade of the Greenstream export line and the construction of a new liquefied natural gas plant with a yearly capacity of 5 bn cm. Scaroni said he sees the new terminal working in the next three to four years. The existing Greenstream line exports Libyan gas to Italy via the island of Sicily.
Kepler's Mascarello said the new LNG plant is almost like "having one on the Italian coast without all the difficulties in obtaining permits," considering the two countries face each other across the Mediterranean Sea.

The construction of new LNG terminals in Italy is hampered by high level of bureaucracy and usually opposition from local residents. Scaroni brushed aside concerns the new Greenstream gas imports will face opposition from Italy's regulator. He said new gas projects in the peninsula will reduce ENI’s market share in the country to below regulatory caps.
ENI’s CEO told that the company's current daily oil and gas production in the North African country averages about 290,000 barrels of oil equivalent. The Rome-based group's daily average hydrocarbon output last year totalled 1.77 mm barrels of oil.

Scaroni said that Libya's output is worth about 20 % of ENI’s total production. He added that over these next years Libya will be "more important" than Kazakhstan's massive Kashagan project.
The CEO said that based on a daily production of 300,000 barrels oil equivalent estimate in 2015 from Kashagan, ENI’s share of about 50,000 barrels is well below what it is producing now in the North African country.

The ENI-led group developing Kashagan is in dispute with the Kazakh government over continued start-up delays and cost overruns at Kashagan, which was billed as the biggest oil discovery in 30 years when it was found.

Source: Dow Jones & Company
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