ANALYSIS-Eni could lose long term in Libya if backlash

Tue Aug 23, 2011 4:15pm GMT

-     * Eni know-how crucial in short term to get oil flows
    * Italy's stuttering stance on rebels hurt credibility	
    * Russia, China oil groups could lose out	
    By Stephen Jewkes	
    MILAN, Aug 23 (Reuters) - Eni , the biggest foreign
oil producer in Libya before the civil war, could lose assets or
opportunities in the long run if Italy's hesitant support for
the rebel government early in the conflict leads to a backlash.	
    The rebels, who are close to winning a six-month war against
Muammar Gaddafi, have already said firms from Russia and China
could fall out of favour for the lack of support for the
uprising, thus opening the doors to companies from Britain,
France and the United States to gain more assets. 
    "In the short-to-mid term I see no risk for Eni. Any new
government will need cash and that means getting production
onstream fast. To do that they'll need Eni," said Stefano
Casertano, senior fellow at German think-tank 
    "We'll see further on if there's a diplomatic-type attack
for access to what Eni controls," he added.	
    While Italy hesitated, Britain, France and the U.S. led the
early drive for intervention in Libya to protect the rebels.	
    Italian premier Silvio Berlusconi, long Gaddafi's closest
European ally, was silent in the initial days of the uprising in
February, and his government's calls for Gaddafi to step down
were much more subdued than those of European peers. 
    Berlusconi has also said he was against NATO intervention in
Libya but was forced to go along with it. His main coalition
partner, the Northern League, has long opposed intervention. 
    In March, Eni Chief Executive Paolo Scaroni called on Europe
to abandon sanctions against Libya in an attempt to rebuild
bridges when Gaddafi had seemed to be regaining control of the
    A diplomatic source in Rome told Reuters last month Italy's
initially subdued condemnation of Gaddafi followed by an abrupt
switch in April to fully back the rebels had damaged its
credibility and could prove costly in the long run.	
    Italy has recently moved fast to seize back the initiative.
Berlusconi said he will meet Libyan rebel leader Mahmoud Jibril,
and Foreign Minister Franco Frattini said Eni staff were in
Libya to try to restart oil facilities, adding, "It is clear Eni
will play a No. 1 role in the future."	
    France's Total is an active player in Libya.
Britain's BP has assets there but no production, as does
Royal Dutch Shell (RDSa.L: Quote). U.S. groups Marathon Oil Corp
 and ConocoPhillips are also active. 	
    Gaddafi's fall could give new players such as Qatar's
national oil company and trading house Vitol opportunities.
Qatar was quick to establish links with Libyan rebels and was
the first Arab country to give planes to police no-fly zones.	
    "There is obviously some benefit to the countries that
helped the Libyans in the crisis, but that advantage can go
quite quickly. So British companies and French companies would
want to get there as quickly as possible," Gavin De Salis,
chairman of oil services firm OPS International, told Reuters
    Eni, in Libya since the 1950s, produced about 270,000
barrels of oil equivalent per day in 2010. Its oil production
contracts are in force to 2042 and gas contracts to 2047.
    "Eni getting production restarted fast would win it good
will with any new government in Libya," said Justin Jacobs, oil
and gas analyst at Business Monitor International. Eni has said
that if stability returns, it would take one year to restart oil
production and two to three months for gas.    	
    On Tuesday the Libyan rebel envoy to Italy said he expected
Italian contracts to be respected in a post-Gaddafi era.	
    Russia and China opposed tough sanctions on Gaddafi, and
some say energy companies there could feel a backlash. 
    "We don't have a problem with Western countries like
Italians, French and UK companies. But we may have some
political issues with Russia, China and Brazil," said Abdeljalil
Mayouf, information head at Libyan rebel oil firm AGOCO. 
    Russian companies, including oil firms Gazprom Neft
 and Tatneft , had projects worth billions of
dollars in Libya before the conflict started. China, which took
3 percent of its imported crude from Libya last year, had about
75 companies operating there. 
    "The Chinese and Russians were reticent to step in and play
an active pro-rebel role. Certainly European and U.S. companies
stand to benefit from that," said Jacobs. 
    Before the war, Gazprom Neft agreed to buy a stake from Eni
in Libya's Elephant field, but that has been put on hold. Eni is
a strategic partner of Gazprom. 
    Going forward, much will depend on what a future rebel
government will look like and where its sympathies lie. 
    "The big question is who the rebels are. I don't think we've
seen the real leadership yet, which will probably be made up of
new figures," said Karim Mezran, professor for Middle East
Studies at Johns Hopkins SAIS in Bologna. 
    "And another big issue is unfreezing Libyan assets. How the
European countries handle that one could give them leverage for
their own oil companies." 
    Libyan investors own some 7.5 percent of Italy's biggest
bank, UniCredit , around 1 percent of Eni and some 2
percent of aerospace and defence group Finmeccanica 
    (Additional reporting by Deepa Babington in Rome, editing by
Jane Baird)
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