Eni set to sign landmark Libyan gas deal worth $8bn

Libya's state-owned NOC is poised to sign an 845mn ft³/d offshore gas project deal with Italy's Eni worth an estimated $8bn, representing the largest single investment in the north African country's upstream sector since the 2011 civil war.

"We have reached an agreement with Eni and the signing ceremony will take place on 28 January," NOC chairman Farhat ben Gudara told local TV channel Al Masar. Eni declined to comment.

The long-delayed deal will not only help Libya meet rising domestic gas demand but will also boost its gas exports to Italy, which slumped to the lowest level since 2011 last year. The agreement is due to be signed in Tripoli during the first visit to Libya by Italian prime minister Giorgia Meloni, who is pushing her "Mattei plan" that seeks to deepen Italy's energy and political ties to Africa. Italy has been scrambling for alternative gas supplies since Russia's invasion of Ukraine and is looking to north Africa in particular.

Central to the agreement with Eni is the Structures A&E project in Block NC-41, which will have the capacity to produce 760mn ft³/d of gas and 47,000 b/d of liquids, mostly condensate. This is equal to about 65pc of Libya's current 1.2bn ft³/d of sales gas production capacity. The agreement is also likely to include the 85mn ft³/d Bouri Gas Utilization project, which plans to capture associated gas output that is currently being flared at the 25,000 b/d Bouri oil field in Block NC-41. With its own climate goals in mind - and Libya's nascent decarbonisation ambitions - Eni has floated the possibility of incorporating a carbon capture and storage (CCS) element to its projects in the block.

The company said in October last year that it expects first gas from Structures A&E in 2024, with the project slated to reach full capacity in 2027. The relatively safe location of the two projects offshore Tripoli makes them less vulnerable to disruption than Libya's onshore fields. The country's decade-long political quagmire has not only hampered new oil and gas projects from getting off the ground but has also frequently led to existing output being shut down for political purposes.

With Libya still roughly split between rival western and eastern administrations, political division still poses a threat. The head of the eastern-aligned Government of National Stability (GNS), Fathi Bashagha, has pushed back against the Eni deal, saying the western-based Government of National Unity (GNU) lacks the legitimacy to sign such an agreement.

Eni is Libya's largest foreign gas producer, overseeing most of the country's gas output via its Mellitah Oil and Gas joint venture with NOC. Mellitah's production is split between the offshore Bahr Essalam project and the Wafa wet gas project located on the border with Algeria, as well as some fields in the Sirte basin, Libya's oil heartland. Mellitah's western output feeds the 775mn ft³/d Greenstream pipeline - Libya's only gas export outlet - which has been running at well below capacity over the past few years. Exports through Greenstream hit their lowest level since the 2011 revolution last year, averaging some 250mn ft³/d.

By Aydin Calik