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Russia to Profit from Libyan Uncertainty?

fleelibya2.jpgAs political turmoil in Libya deepens, a plethora of reports suggest that multinational oil companies based in the North African state are preparing to make their getaway, evacuating staff and in some cases closing offices.  An expert analysis from Dianne Sutherland, Editor-in-Chief of Petroleum Africa Magazine in Cairo, reprinted in Oil and Gas Eurasia, examines how, in the long term, Russia could benefit from the upheavals in terms of gaining a coveted foothold in the region:

Russian companies are very keen to establish a strong presence in North Africa to secure natural gas for various reasons, and oil is a bonus.



Lukoil already holds stakes in Egypt, Tatneft is in Libya, and Gazprom is in Algeria. Gazprom also just completed a deal with ENI for the Elephant Field in Libya. While Libya’s future is most uncertain at this point, I think that Russian companies may have a political advantage over their American and European counterparts should the Qaddafi regime stay in place, and if not, the playing field should stay pretty level.



There will definitely be short-term supply disruptions out of Libya.Based on President Qaddafi’s remarks Tuesday, it does not appear he willgo easily, opening the door for more oil supply concerns and thecontinued rise of the barrel price. Both Ben Ali and Mubarak also saidthey were not going anywhere, and we know how that turned out. ButQaddafi is a different animal; I would characterize him as amegalomaniac, which makes him especially dangerous as can be seen withthe all out deadly force being used against the demonstrators.



As a result of the force shown so far, Wintershall announced on Monday that it had already shut-in its production while Repsol, RWE, Tatneft and ENI followed suit announcing Tuesday that they had also shut-in production. Wintershall, Repsol and ENI alone account for about 250,000 bpd of oil production; ENI also puts out 780 Mmcf/d of natural gas.

Other European producers will likely turn off their taps sooner rather than later if the status quo continues. Also of concern is gas supply into Europe as Libya ships a substantial amount of gas to Italy through the Greenstream Pipeline. The pipeline has a capacity of 11 Bcm per year equating to about 11% of Italy’s gas supply, which has now been shut-in by ENI. A protracted shut-in could become problematic for Italy.



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Russian companies potentially have a very good opportunity to gain some ground in North Africa depending on how the events play out in the individual nations and their competitor’s reactions, but the bottom line will be the Russian’s appetite for risk.

Read the whole article here.