Oil Energy Money

Gazprom has signed a production-sharing agreement (PSA) with the Libya’s National Oil Company to develop a hydrocarbon field on the Mediterranean shelf.  The firm will share assets with Italian group ENI, the largest operator in the area.  This joint venture is one of the first fruits from Gazprom and ENI’s strategic partnership agreement in 2006 which encouraged upstream and downsteam co-operation.

Libya is of particular interest in the oil rich North African region because of its nationalisation in 1974.  Colonel Gaddafi only allowed foreign firms like ENI and Shell to return a few years ago, creating an opportunity firms have been anticipating for the last three decades.  ENI intends to invest $28bn in the region and BP famously signed a $900m deal to explore 54,000 square kilometres at the onshore Ghadames and offshore Sirt basins.

This expansion is a further indicator of international interest in North Africa.  Libya has the fourth largest proven gas reserves in North Africa at 1.4 trillion cubic meters, behind only Algeria, Nigeria and Egypt.  Tullow Oil recently sold £35m worth of its North Sea assets to focus on investment in Uganda and Ghana.  Tunisia will be hosting the 6th annual Maghreb & Mediterranean Oil & Gas Conference this June, hoping to attract further government and private sector interest.  This shouldn’t be too hard a task so expect some big announcements to follow the conference.

Those worried about Gazprom’s increasing stranglehold on European markets are probably not overjoyed at its expansion to Libya.   Europe gets a quarter of its natural gas from Gazprom and looked to the North African region to provide alternative producers.  Russia and Italy won’t be complaining though,the two have formed strong partnerships and stand to benefit from any increase in market control.  “Italians and Russians have a stable, strong relationship of trade and economic links” Putin said in a statement regarding the 2006 agreement, ”They have put new billions into the Russian energy market.”  That’s good news for Gazprom, but is it good news for competitive markets?