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№ 10 (October 2011)

Editor's Letter

Refined Product Shipments, ENI Support Bodes Well for Russia’s Return to Libya

Pat Davis Szymczak

   With a double dip recession “imminent” in the United States, a troubled Euro zone and another Russian winter on the way I’m finding it hard to find anything positive to write about.

   I don’t mind the negative. But I like to approach negative realities as challenges that can be dealt with and turned into positives. It’s my Midwestern American upbringing – and ideology.

   So let’s look at some news in search of some silver linings. I’ll leave U.S. recessions (soon to be a global recession) and Euro zone problems to the bankers and politicians who caused the problems to begin with.

   I consider myself fortunate to have been working as a journalist in Russia in the 1990s when common people were regularly fleeced of their bank accounts. Do you remember the MMM scam? Much of what has happened in the West in the last couple of years is similar – it’s just bigger and it’s been candy coated.
But let’s get off philosophical issues – let’s look at Libya.

   Did Russia err in supporting Qaddafi? Maybe not. It seems Russia may have succeeded in “sitting on all chairs” and will yet come out OK. Mark Pabst, writing in the October issue of Petroleum Africa magazine pointed out that “…while the Russian government may have initially taken a stand against the NTC (National Transition Council), unnamed sources have been widely quoted in news services claiming that Russian refined oil products were shipped to the rebels even before Moscow recognized the new Libyan government.”

   "If this is true, Russian businessmen may have been out in front of the politicians; a fact that could be a blessing for Russian companies,” Pabst wrote. Evidence may be found in the fact that in September, ENI and Gazprom reaffirmed their deal (signed originally in February) to give Gazprom 50 percent of ENI’s stake in Libya’s Elephant field.

   Pabst points out that ENI “has such a huge presence in the country that the new Libyan leaders cannot ignor it if they want to reach their ambitious production targets, and ENI executives have been keen to engage the NTC leadership once NATO sided with the anti-Qaddafi forces.” In August, ENI CEO Paolo Scaroni visited with top rebel leaders in Benghazi and then in September met with top NOC (National Oil Company) officials,” Petroleum Africa reported.
So, thanks to Russia’s strong government-to-government relationship with Italy and the long history of cooperation between Gazprom and ENI, Russian interests may be secure. China has a different problem. According to Pabst, the NTC claims it has evidence that “the Chinese sold weapons to the Qaddafi regime in violation of UN sanctions.” The same documents, also supposedly revealed that “NTC allies Great Britain and the United States helped Qaddafi track down dissidents in recent years,” – a sin the new Libyan leadership is likely to forgive and forget. “How long it takes the NTC to forgive China may be another matter,” Pabst wrote.

   I invite you to visit for more insight on Libya and to read Pabst’s excellent snapshot of Libyan oil and gas affairs in full. In November, Pabst will contribute to Oil&Gas Eurasia an analysis that delves more in detail into Russian interests in Libya. So don’t miss this issue.

   Also, in November, Oil&Gas Eurasia will be examining Russia’s interest in technologies to develop unconventional resources including shale gas and tight oil. This month, OGE reports on the tie up between Rosneft and ExxonMobil. A few years back, Rosneft had negotiated unsuccessfully with Exxon to trade the U.S. super major a role in the Russian Arctic offshore (Shtokman at the time) in exchange for Rosneft’s entry into one of Exxon’s LNG projects. Today, Exxon has finally gotten it’s nose under the Arctic tent (in the Kara Sea) but the quid pro quo to Rosneft is “tight oil” and shale in North America, along with some offshore in deep water Gulf of Mexico.

   Technology transfer is the goal, and Russian majors are achieving this goal by becoming a part of international consortiums and joint ventures operating internationally. We’ll hear plenty about technology – Arctic technology that is – at the SPE Arctic & Extreme Environments Conference & Exhibition 18-20 October in Moscow. OGE will be there and we hope you will too.

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