December 21, 2024

Gas Resumes Flowing From Eni’s Libya Plant

Eni said it might take several more days to reopen the pipeline, which is the single transmission conduit for Libyan natural gas to Italy and, from there, elsewhere in Europe.

While company executives said the supply impact would be minimal, given Eni’s stored reserves in Italy and other sources of gas, analysts said the turmoil had amplified concerns about the stability of energy production and distribution in North Africa. Energy markets and investors are still nervous after the murderous assault in January by militants on an Algerian gas field run by BP and Statoil of Norway.

“The episode is yet another example of energy firms’ operations in North Africa being disrupted by security problems,” IHS, an energy research firm in London, said Monday in a report. “The collective impact of these disturbances is to further discourage foreign direct investment into the energy sector.”

On Saturday, as fighting between rival Libyan militias became too close for comfort, Eni, the biggest foreign oil and gas player in Libya, shut down its giant Mellitah gas complex on the coast west of Tripoli and evacuated most of its personnel.

The Mellitah complex, which Eni built for an estimated €9 billion, or $12 billion, and opened in 2004, gathers and processes gas from fields in western Libya and then sends it through the Greenstream pipeline, which runs under the Mediterranean and comes ashore in Gela, Sicily.

The gas business is a joint venture with the Libyan national oil company.

Although Greenstream provides about 12 percent of Italy’s gas, Italian consumers are unlikely to notice the temporary shutdown, said Kash Burchett, an analyst at IHS. The stagnant Italian economy has sharply reduced demand for gas; Italy has about one month’s worth of gas in storage; and several other pipelines deliver the fuel from other sources, including Algeria and elsewhere in Europe.

But the shutdown could further set back the troubled economies of Libya and its North Africa neighbors, while dimming prospects for new investment in the region by international oil and gas companies.

Since the fall of Col. Muammar el-Qaddafi in 2011, Libya has been in a state of chaos as rival militias vie for turf and treasure. But until now the armed groups have left Libya’s oil and gas fields alone — or in Eni’s case, have even carefully protected the operations, which keep the country’s lights on and the money flowing in.

“The energy installations have been left out of the instability because there is wide recognition about as to how important they are to the economy,” said Richard Cochrane, a security analyst at IHS.

Why the militias crossed a line this past weekend is not entirely clear. One theory, not denied by Eni, is that the two militias were fighting for the privilege of guarding Libya’s most important oil and gas installation, as well as the economic and political benefits that accrue to whoever has that status.

“Libya is different from Algeria; there is not yet a capacity on the part of the central government to provide security,” said David L. Goldwyn, a former senior energy envoy for the U.S. State Department. As a result, he said, “companies are obliged to secure local security.”

The inability of the Tripoli government to provide security means “the investment climate in Libya has been challenged for some time,” said Mr. Goldwyn, who now heads Global Strategies, a consulting firm in Washington. “You are seeing companies protect existing investments in Libya, but being much more cautious in respect to large-scale” new commitments, he said.

Foreign energy companies with existing operations in North Africa might be hard to uproot. But countries including Libya, Algeria and even Egypt, whose economies depend on the oil and gas industry, are going to have trouble attracting new investments.

In a research note published Monday, Fadel Gheit, an analyst at Oppenheimer, argues that Houston-based Apache, which has built a big, highly profitable oil business in Egypt, would be better off decamping from the land along the Nile where it now obtains 28 percent of its petroleum.

“We are more pessimistic about Egypt’s future than in any time in the last two years,” Mr. Gheit wrote. We think Apache “would be better off exiting Egypt by selling its operations and using the proceeds to buy back shares, reduce debt and boost investments elsewhere.”

Apache declined to comment.

Article source: http://www.nytimes.com/2013/03/05/business/energy-environment/05iht-gas05.html?partner=rss&emc=rss

DealBook: Freeport to Buy Plains Exploration and McMoRan

A mine in Indonesia's Papua province operated by Freeport McMoRan Copper  Gold.Muhammad Yamin/ReutersA mine in Indonesia’s Papua province operated by Freeport McMoRan Copper and Gold.

Freeport-McMoRan Copper and Gold said on Wednesday that it would buy two oil and natural gas companies, Plains Exploration and Production and the McMoRan Exploration Company, in a return to the energy business.

The two transactions will create a natural resources titan worth about $60 billion, including debt, and will formally reunite Freeport with McMoRan, the oil exploration company it spun off in 1994.

Under the terms of the deals, Freeport will pay about $6.9 billion in cash and stock for Plains. That offer consists of $25 a share in cash and 0.6531 of a Freeport share, worth about $50 a share based on Tuesday’s closing prices.

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And Freeport will pay $14.75 a share in cash and 1.15 units of a trust that will hold a 5 percent interest in future production of McMoRan’s deepwater exploration operations. Freeport and Plains together already own about 36 percent of the smaller exploration company.

“This transaction will enable us to add assets with exceptional exploration and development potential to a world-class mining company to create a premier minerals and oil and gas business focused on value creation for shareholders,” James R. Moffett, Freeport’s chairman, said in a statement.

JPMorgan Chase is providing $9.5 billion to help pay for the cash portion of the deal and to repay some of Plains’s existing debt.

Freeport was advised by Credit Suisse and the law firm Wachtell, Lipton, Rosen Katz. Plains was advised by Barclays and the law firm Latham Watkins. McMoRan was advised by Evercore Partners and the law firm Weil, Gotshal Manges.

A drilling rig operated by Plains Exploration  Production in the Santa Barbara Channel off the California coast in 2007.Bryan Walton/Santa Maria Times, via Associated PressA drilling rig operated by Plains Exploration and Production in the Santa Barbara Channel off the California coast in 2007.

Article source: http://dealbook.nytimes.com/2012/12/05/freeport-to-buy-plains-exploration-and-mcmoran/?partner=rss&emc=rss