Eni CEO Paolo Scaroni (L) and Gazprom Vice-President Alexander Medvedev. Photo: Reuters
What makes Paolo Scaroni think he’s so smart? The chief of ENI Spa, the world’s sixth-largest publicly traded oil company, is heir to a long tradition of high-stakes dealmaking with rogues from Iran to Angola. These days Scaroni is guiding Eni into the nasty Russian energy business–and is convinced he can survive unscorched. A lot rides on his bet. Eni already is the biggest customer of Gazprom, the Russian state-controlled gas producer that is nationalizing most domestic oil and gas production. Eni also shares control of one of the largest pipelines bringing Russian gas into Europe and recently announced plans for a pipeline across the Black Sea to Bulgaria that will solidify Gazprom’s hold on the European energy market. Scaroni & Co. are also developing Kashagan–an estimated 13 billion barrels of oil reserves, the largest discovery since Alaska’s Prudhoe Bay–in the former Soviet republic of Kazakhstan. The pipeline from Kashagan goes through Russia, which exerts influence over the $29 billion project. Eni has a 19% piece of Kashagan. … Earlier this year, for example, Eni agreed to pay $5.8 billion for a collection of assets from Yukos, the bankrupt oil company founded by jailed Russian oligarch Mikhail Khodorkovsky. The agreement, reportedly brokered with the help of Italian Prime Minister Romano Prodi, contained an unusual provision: For the next two years Gazprom can buy most of the assets from Eni for $4.8 billion. What, if anything, had Eni bought? Khodorkovsky’s lawyer, Robert Amsterdam, denounced the whole transaction as a sham, designed to protect Gazprom from lawsuits by investors who have a $33 billion claim pending in the Hague over accusations the Russian government illegally stripped Yukos of its assets. “They’re playing dirty, which is actually what you have to do to succeed in Russia,” Amsterdam says. But he gives Eni backhanded praise for exploiting the situation. Even if Gazprom exercises all its options, the Italian oil giant will have purchased the equivalent of 1.5 billion barrels of oil for less than 50 cents a barrel.