Oil price helps Libya extract better terms from Eni
Carola Hoyos | Saturday, 21 June 2008
ENI, Italy's biggest energy group, rewrote recently all of its contracts in Libya, setting the tone for the rest of the industry by accepting worse terms in return for another 35 years of access to one of the world's most important hydrocarbon reserves.
As oil prices have risen to nearly $140 a barrel and oil companies have stormed back to Libya following the removal of US sanctions, Tripoli has demanded a greater share of the profits from its oil and gas fields.
Paolo Scaroni, Eni's chief executive, said in an interview: "We have reviewed all the contracts that have been driving our relationship in Libya for the past 44 years. This is a big deal. We have given something up, but we have also secured our position in our number one country for the foreseeable future."
Eni remained in Libya even as its competitors fled because of US sanctions. The company pumps 300,000 barrels a day of oil and gas, or 17 per cent of its worldwide production, from the North African country.
In the contracts he signed, Mr Scaroni accepted a significantly smaller share of the oil and gas his company gets from its Libyan projects.
On most of its older fields, Eni's share was cut in half. However, the company will retain a larger stake in its relatively new gas project in western Libya, where it is expected to invest most heavily in coming years.
"I think Libya has a phenomenal future in gas," Mr Scaroni said.
Eni is not alone in having to accept a smaller stake. Libya is also renegotiating with France's Total, Spain's Repsol, PetroCanada and Occidental of the US.
Shokri Ghanem, chairman of Libya's national oil company, said: "These are new contracts that are going to work and last. They give us a higher share, but they do not forget the partners who are investing money and technology and also the international oil companies will be rewarded generously."
Mr Ghanem praised Mr Scaroni's willingness to accept more quickly than other international oil company executives that the power balance in the oil industry had changed.
Elsewhere -- from Venezuela to Kazakhstan -- oil-rich governments and their national companies have been demanding a greater share of the riches.
Even the UK has increased the tax burden on companies that are exploiting its fields in the North Sea, raising its take twice as oil prices have risen.
Eni's negotiations with Libya's national oil company took more than a year and 19 trips across the Mediterranean by Mr Scaroni.
After signing the new deals in a dimly lit conference room at the headquarters of Libya's national oil company, Mr Scaroni joked: "He is going to exploit the concessions he got from us, as he negotiates with the other companies because he plays the game to the end."
But there is a grain of truth in the quip. In an interview after the signing, Mr Ghanem said Eni had won by accepting the new terms first and would not find itself at a disadvantage vis
As oil prices have risen to nearly $140 a barrel and oil companies have stormed back to Libya following the removal of US sanctions, Tripoli has demanded a greater share of the profits from its oil and gas fields.
Paolo Scaroni, Eni's chief executive, said in an interview: "We have reviewed all the contracts that have been driving our relationship in Libya for the past 44 years. This is a big deal. We have given something up, but we have also secured our position in our number one country for the foreseeable future."
Eni remained in Libya even as its competitors fled because of US sanctions. The company pumps 300,000 barrels a day of oil and gas, or 17 per cent of its worldwide production, from the North African country.
In the contracts he signed, Mr Scaroni accepted a significantly smaller share of the oil and gas his company gets from its Libyan projects.
On most of its older fields, Eni's share was cut in half. However, the company will retain a larger stake in its relatively new gas project in western Libya, where it is expected to invest most heavily in coming years.
"I think Libya has a phenomenal future in gas," Mr Scaroni said.
Eni is not alone in having to accept a smaller stake. Libya is also renegotiating with France's Total, Spain's Repsol, PetroCanada and Occidental of the US.
Shokri Ghanem, chairman of Libya's national oil company, said: "These are new contracts that are going to work and last. They give us a higher share, but they do not forget the partners who are investing money and technology and also the international oil companies will be rewarded generously."
Mr Ghanem praised Mr Scaroni's willingness to accept more quickly than other international oil company executives that the power balance in the oil industry had changed.
Elsewhere -- from Venezuela to Kazakhstan -- oil-rich governments and their national companies have been demanding a greater share of the riches.
Even the UK has increased the tax burden on companies that are exploiting its fields in the North Sea, raising its take twice as oil prices have risen.
Eni's negotiations with Libya's national oil company took more than a year and 19 trips across the Mediterranean by Mr Scaroni.
After signing the new deals in a dimly lit conference room at the headquarters of Libya's national oil company, Mr Scaroni joked: "He is going to exploit the concessions he got from us, as he negotiates with the other companies because he plays the game to the end."
But there is a grain of truth in the quip. In an interview after the signing, Mr Ghanem said Eni had won by accepting the new terms first and would not find itself at a disadvantage vis