President Vladimir Putin discussed energy relations with top managers of the Italian companies Eni and Enel at his Novo-Ogaryovo residence near Moscow on April 2. Eni said it would share its development quotas for Libyan gas deposits with Russia's Gazprom. Putin described the two countries' energy relations as a breakthrough.

A year ago Eni and Enel bought several companies, including Arcticgas and Urengoil, at an auction held to sell the assets of bankrupt oil company Yukos, as well as a 20-percent stake in Gazprom Neft, the oil division of Gazprom. They paid $5.83 billion for these assets.

Eni also owns 50 percent of the Blue Stream gas pipeline under the Black Sea (the rest belongs to Gazprom). Enel holds a 59.8-percent stake in the wholesale generating company OGK-5 and a 49.5-percent stake in the Russian power supplier RusEnergoSbyt. Eni is also involved in the South Stream pipeline, which was mentioned at the meeting with Putin as one of the most promising cooperation projects.

The list has now been extended to include asset swap deals between Gazprom and Eni.

Libya has become a highly promising source of oil and gas supplies for Europe now that sanctions against it have been lifted. Its proven natural gas reserves are estimated at 1.49 trillion cubic meters (the fourth largest in Africa after Algeria, Nigeria and Egypt). Libya annually produces 80.1 million tons (588.74 million bbl) of oil and 7 billion cubic meters of gas. It consumes 83 percent of its gas and exports the rest.

Libya is ranked first in Africa and fifth in the Organization of Petroleum Exporting Countries (after Saudi Arabia, Kuwait, the United Arab Emirates and Iraq) in terms of proven reserves of low-sulfur light oil (5.1 billion tons, or 37.48 billion bbl).

Gazprom wants to have a share in Libyan deposits. Last year it bought an exploration and development license for Block 19 there, with gas reserves comparable to the reserves of the South Russkoye gas deposit in the Yamal-Nenets Autonomous Area in the northeast Urals. It plans to invest $300 million in the project within four years.

The gas monopoly acquired three projects in Libya in 2007. In March it signed a production sharing agreement with Libya's National Oil Corp. for a 10.3-square-kilometer block in the Mediterranean Sea, where it intends to invest $200 million by 2012.

Gazprom also recently received a 49.9-percent stake in two oil concessions from Germany's BASF under last year's asset-swap agreements.

Gazprom has long been eyeing Eni's projects in Africa, which it discussed in 2006, when Eni wanted to buy Gazprom's stake in the independent Russian gas producer Novatek.

Eni holds a 50-percent stake in the Green Stream pipeline in Libya with an annual capacity of 8 billion cubic meters. It links two offshore deposits in the Mediterranean with Sicily. The Italian company also owns a stake in an LNG plant with a capacity of 3.2 million tons a year, a 33.3-percent stake in the Elephant oil deposit, whose reserves are assessed at 68 million tons (499.8 million bbl), and four exploration and development licenses for deposits in central Libya.

Last fall the Italian concern strengthened its foothold in Libya by agreeing to prolong its contracts for the production and export of oil and gas for 25 years. The agreements also provide for doubling the facility for Libyan gas exports to Italy by increasing the capacity of Green Stream by 3 billion cubic meters (today its annual capacity is 8 bcm) and building an LNG plant with a capacity of 5 bcm.

Eni and NOC are implementing these projects and using the reserves needed for them, such as the Bahr Essalam offshore deposit and the Wafa onshore deposit, on a parity basis.

Apart from the Libyan projects interesting for Gazprom and its oil subsidiary, Gazprom Neft, Eni can offer them cooperation in Egypt, where it owns a stake in an LNG plant in Damietta. The plant's annual capacity is to be increased to 15 bcm. Eni also owns an exploration license for the El-Bougaz block in the Mediterranean.

During the meeting at Novo-Ogaryovo, Eni CEO Paolo Scaroni outlined the assets his company is prepared to turn over to Gazprom. Apart from power plants in Italy, the Russian company can hope to get a third of the Elephant oil deposit in Libya.

Gazprom's successful foray into North Africa is worrying Europe, which fears that the Russian gas monopoly will reinforce its already strong presence in the European gas market. Gazprom supplies 25 percent of the EU's gas and plans to increase its share to one-third.

The Libyan, and possibly Egyptian, projects will secure enough reserves for Gazprom's emergence on the Italian and Portuguese markets, while the Egyptian assets will help it get a foothold in Spain.

Gazprom will greatly benefit from delivering gas to Europe from North Africa and strengthen its presence in the markets of southern Europe. A share in LNG production in North Africa will greatly contribute to Gazprom's plans, recently made public, to account for 25 percent of the global LNG market by 2030 and to stop using intermediaries for LNG deliveries to and sales in the United States.

(Igor Tomberg is a senior research fellow at the Center for Energy Studies, the Institute of World Economy and International Relations at the Russian Academy of Sciences. The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti. This article is published with permission from RIA Novosti.)

(United Press International's "Outside View" commentaries are written by outside contributors who specialize in a variety of important issues. The views expressed do not necessarily reflect those of United Press International. In the interests of creating an open forum, original submissions are invited.)