Italy, Eni told to 'forget' Libya's oil

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, July 15 -- Libya’s Prime Minister Al-Baghdadi Ali Al-Mahmoudi said his government has stopped all cooperation with Eni SPA, the country’s largest international oil company, due to Italy’s participation in the bombing campaign being waged by the North Atlantic Treaty Organization.

"The Italian government needs to totally forget about Libyan oil and every agreement we signed in the past," said Al-Mahmoudi. "We have now ended all cooperation with Eni,” he said, adding that the Italian firm “will have to look elsewhere for business.”

Libyan officials earlier warned nations involved in NATO’s bombing campaign that they could be barred from investing or participating in the country's oil sector if they continue to side with the rebels. But Italy is the first country it has formally barred.

Al-Mahmoudi said Italy was singled out because its government had broken a friendship agreement signed with Tripoli that barred any aggressive acts. Rome claims the treaty has been "suspended" as a result of attacks by the Libyan regime on its own population.

"If [Italian Premier] Silvio Berlusconi says he was pressured [by the NATO coalition] to attack Libya, I was pressured by the Libyan people to cut ties with Italy," said Al-Mahmoudi. "The countries that attacked us should not expect us to deal with them in the future, especially with regard to oil."

Apart from Italy’s support for the NATO campaign, Eni angered Tripoli by suspending its operations in the country and by establishing links with the opposition forces that are trying to overthrow Libya’s leader Moammar Gadhafi.

Tripoli’s decision could have a substantial impact as Italy is the biggest investor in Libya and Eni spearheads the relationship. Eni produced 250,000 b/d in the North African country, or about 14% of its total production. Overall, Italy buys 28% of Libya’s oil and 10% of its natural gas.

“Italy, and particularly Eni, are heavily exposed in Libya and stand to lose a great deal if things fall apart,” said Nicolo Sartori, an energy and security researcher at Rome’s IAI Institute for International Affairs.

“Eni’s production and exploration interests in the area are considerable,” said Sartori earlier this year.

“The market is naturally jittery given the fact that Eni has 10-year contracts that could suddenly become scrap paper if the people that negotiated and signed them are gone,” said Alessandro Frigerio, a fund manager at RMJ Sgr in Milan.

“One can only hope that the longstanding links with the country and Eni’s experience in difficult zones will help,” Frigerio said at the outbreak of hostilities in February.

Despite the action against Eni, Al-Mahmoudi said his government is in talks with firms from Russia, China, and the US over new projects in Libya, though he did not give details. He said Tripoli was prepared to let US firms invest because Washington is not taking a direct role in the NATO bombing of Libya.

"Those who come one step toward us, we will come two steps toward them," Al-Mahmoudi said. "But Italy is finished."

NATO mission
Meanwhile, Gadhafi has ordered his troops to blow up refineries and other facilities if they have to retreat, according to the head of the NATO mission over Libya.

“I can report that the Gaddafi regime has given direction to its forces to destroy certain facilities as they withdraw back, such as fuel refineries and other aspects,” said NATO commander Lt. Gen. Charles Bouchard.

“This is a government, this is a leader that will not hesitate to kill his own population to achieve his personal goals. He has lost all legitimacy to lead his people,” Bouchard said.

Bouchard’s remarks coincided with reports that forces opposed to Gadhafi are ready to launch a new offensive on the oil town of Brega, hoping to dislodge the 2,000-3,000 troops loyal to Gadhafi who now hold the town.

“We are preparing to enter Brega. The attack will come soon,” said one rebel official. Another said, “We will move in the coming hours and we shall soon be in Brega, God willing.”

Brega, which has changed hands multiple times during Libya’s 5-month civil war, is home to Libya’s oldest refinery with a crude capacity of 18,000 b/d and to major oil and gas export terminals. About 300 vessels/year call in at Brega.

Earlier this month, NATO aircraft struck military refueling equipment to deny pro-Gadhafi forces access to fuel in the Brega area after concluding that it was being used to provide fuel for military vehicles and equipment engaging in attacks on civilians in eastern Libya (OGJ Online, July 7, 2011).

Contact Eric Watkins at hippalus@yahoo.com.



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