Eni SpA, the Italian oil producer that’s drilled in Libya during the whole of Muammar Qaddafi’s 41-year rule, is the foreign company with most to lose as violence escalates and the regime threatens to unravel.
As the former colonial power, Italy is the biggest investor in Libya and Rome-based Eni is at the forefront of the relationship. Italy’s largest company pumps almost 250,000 barrels a day in the North African country, or about 14 percent of its total production. Eni’s shares extended declines today after falling the most in 19 months yesterday.
“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.”
Diplomats resigned and soldiers deserted in protest after violent repression of anti-government demonstrators left hundreds dead in Libya, North Africa’s largest oil producer. Uprisings against political repression and economic stagnation have already toppled autocratic regimes in Tunisia and Egypt. Oil prices jumped to a two-year high in New York today.
Eni fell 1.7 percent to 17.11 euros today on Chi-X Europe Ltd., Europe’s largest alternative trading system. The stock slumped the most since July 2009 on the Italian Stock Exchange yesterday. The exchange failed to open today because of “technical issues.”
Eni said in a statement yesterday production in Libya is continuing as normal even as it evacuates non-essential staff and family members of employees. The company, which gets another 13 percent of its production from Egypt and has smaller operations in Tunisia and Yemen, has said repeatedly that it continues to operate in all the countries affected by political unrest.
“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 who does not own Eni shares. “One can only hope that the longstanding links with the country and Eni’s experience in difficult zones will help.”
Eni has been in Libya since 1959, 10 years before Qaddafi seized power in a military coup. Ties between the two countries have strengthened in the past two years since the Italian government apologized for colonial rule from 1911 to 1943 and the two signed a treaty of cooperation.
Chief Executive Officer Paolo Scaroni said last week that Eni had been in Libya for many years and would continue to be there, according to the Ansa news agency.
Eni also operates the Greenstream pipeline from Libya to Italy through the Mediterranean Sea. Italian newswire Ansa reported today members of the anti-Qaddafi movement “February 17” have threatened to cut gas pipelines from the Al Wafa field that flow toward Italy and Europe.
Libya has used its oil wealth to become one of the biggest foreign investors in Italy. Libyan investors own 7.2 percent of UniCredit SpA, Italy’s biggest bank, including a 4 percent stake held by Libya’s central bank, according to Bloomberg data.
The Libyan Investment Authority owned 2 percent of Finmeccanica SpA, Italy’s biggest defense company, as of Jan. 17, 2011, Italy’s market regulator Consob said on its website. Libya also owns 7.5 percent of Juventus soccer club, according to Bloomberg data.
Libya is Eni’s largest source of oil and gas with 244,000 barrels of oil equivalent a day produced in 2009. Eni holds 8,951 square kilometres (3,500 square miles) of developed oil fields in the country, or about one fifth of the company’s total area, according to data on the company’s website. Libya produced an average of 1.6 million barrels a day in January, according to data compiled by Bloomberg.
Eni may be able to find solace in the fact that any regime that follows Qaddafi will be likely as dependent on oil and gas revenue as its predecessor, said Christine Tiscareno, an equity analyst at Standard & Poor’s in London
“It looks like the protesters are pragmatists, not idealists,” Tiscareno said in a phone interview. “If they overthrow the regime, they’re still going to need revenue from foreign oil companies. I don’t think there’s cause for alarm at the moment, but if they get kicked out of the country, Eni’s in trouble.”
Other oil companies have started to wind down operations in Libya. BP Plc suspended exploration because of the worsening violence. Statoil ASA said it closed its office in Tripoli and RWE AG suspended operations.
OMV AG is withdrawing all non-essential staff from the country. The Vienna-based company produced 34,000 barrels a day in Libya in the first nine months 2010, its third-biggest production country after Romania and Austria.
Crude futures for April delivery in New York rose as much as 9.8 percent today from the Feb. 18 settlement and London- traded Brent surged to the highest since September 2008.
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