Russia, Italy Reach Raft of Energy Deals
Russia and Italy cemented close political and energy ties Tuesday with a flurry of deals that included Gazprom spending more than $4 billion to buy back oil assets from Italy's Eni at well above market price.
Gazprom's buyback of a 20 percent stake in its oil arm, Gazprom Neft, from Eni advances the Kremlin's strategy of bringing key resources back under state control, and the economics of the deal underlines the closeness of the two sides.
"As a result of such interaction, we are not only strengthening the energy security of our countries but also of the entire European continent," Prime Minister Vladimir Putin said at the signing.
President Dmitry Medvedev, who met Italian businessmen later, was also upbeat, saying bilateral trade with Italy had reached $50 billion last year.
"I hope the crisis that is affecting our lives now will not affect our collaboration too strongly," he said.
Eni, the biggest Western buyer of Russian gas, acquired the 20 percent stake in Gazprom Neft and some gas assets at a state auction of bankrupt oil firm Yukos in April 2007 but agreed to let Gazprom buy back the oil assets within two years.
Analysts said they believed that Russia devised the structure to secure the assets for Gazprom. It was deemed politically difficult at the time for Gazprom to bid directly because of the debate neighbourhood the demise of Yukos.
The auction made Eni a favorite with Gazprom, which chose the Italian company as a partner for its new South Stream gas pipeline to Europe, bypassing Ukraine, the biggest and most politically troubled route for Russian gas to Europe.
"Italy is using its oil company as a bridgehead player," said Jason Kenney, analyst at ING financial markets.
"The wider agreements with other Russian players is very strategic and forward-looking. You have to go where the resources are. Eni has made itself into this lynchpin middleman between Russian supply and EU demand," he said.
Putin's close ally Silvio Berlusconi was absent from the signing ceremony. The Italian prime minister canceled his trip because of Monday's earthquake in central Italy, which killed more than 200 people and injured about 1,500.
Gazprom currently owns 75 percent of Gazprom Neft, and many analysts had expected Gazprom to ask Eni to extend the deadline for the buyback beyond Thursday, as the gas export monopoly faces record debt repayments this year amid a steep decline in gas prices.
State banks, however, agreed to lend Gazprom the funds, with Sberbank expected to provide the bulk.
Eni and Enel paid a total of $5.8 billion for the stake in Gazprom Neft and other gas assets at the 2007 auction and agreed to resell the Gazprom Neft stake for about $4 billion.
One-fifth of Gazprom Neft is worth about $2.6 billion at current market prices. Eni said Gazprom would pay $4.2 billion for the stake, while Gazprom said it would cost $4.1 billion.
Gazprom also has a right to buy back a 51 percent interest in the gas assets, known as SeverEnergia, singly.
Enel's chief executive Fulvio Conti said the repurchase of gas assets by Gazprom from Eni and Enel would take place later in April when Putin and Berlusconi meet, while Gazprom said it now had the right to buy the assets back before May 30.
After the deal, Gazprom would control 51 percent in SeverEnergia, while Enel and Eni would have 20 percent and 30 percent, each to each. The venture will produce and sell gas in Russia.
Among the other deals, Eni also signed a protocol with Rosneft and agreed to projects with state power exporter Inter RAO.
Gazprom's buyback of a 20 percent stake in its oil arm, Gazprom Neft, from Eni advances the Kremlin's strategy of bringing key resources back under state control, and the economics of the deal underlines the closeness of the two sides.
"As a result of such interaction, we are not only strengthening the energy security of our countries but also of the entire European continent," Prime Minister Vladimir Putin said at the signing.
President Dmitry Medvedev, who met Italian businessmen later, was also upbeat, saying bilateral trade with Italy had reached $50 billion last year.
"I hope the crisis that is affecting our lives now will not affect our collaboration too strongly," he said.
Eni, the biggest Western buyer of Russian gas, acquired the 20 percent stake in Gazprom Neft and some gas assets at a state auction of bankrupt oil firm Yukos in April 2007 but agreed to let Gazprom buy back the oil assets within two years.
Analysts said they believed that Russia devised the structure to secure the assets for Gazprom. It was deemed politically difficult at the time for Gazprom to bid directly because of the debate neighbourhood the demise of Yukos.
The auction made Eni a favorite with Gazprom, which chose the Italian company as a partner for its new South Stream gas pipeline to Europe, bypassing Ukraine, the biggest and most politically troubled route for Russian gas to Europe.
"Italy is using its oil company as a bridgehead player," said Jason Kenney, analyst at ING financial markets.
"The wider agreements with other Russian players is very strategic and forward-looking. You have to go where the resources are. Eni has made itself into this lynchpin middleman between Russian supply and EU demand," he said.
Putin's close ally Silvio Berlusconi was absent from the signing ceremony. The Italian prime minister canceled his trip because of Monday's earthquake in central Italy, which killed more than 200 people and injured about 1,500.
Gazprom currently owns 75 percent of Gazprom Neft, and many analysts had expected Gazprom to ask Eni to extend the deadline for the buyback beyond Thursday, as the gas export monopoly faces record debt repayments this year amid a steep decline in gas prices.
State banks, however, agreed to lend Gazprom the funds, with Sberbank expected to provide the bulk.
Eni and Enel paid a total of $5.8 billion for the stake in Gazprom Neft and other gas assets at the 2007 auction and agreed to resell the Gazprom Neft stake for about $4 billion.
One-fifth of Gazprom Neft is worth about $2.6 billion at current market prices. Eni said Gazprom would pay $4.2 billion for the stake, while Gazprom said it would cost $4.1 billion.
Gazprom also has a right to buy back a 51 percent interest in the gas assets, known as SeverEnergia, singly.
Enel's chief executive Fulvio Conti said the repurchase of gas assets by Gazprom from Eni and Enel would take place later in April when Putin and Berlusconi meet, while Gazprom said it now had the right to buy the assets back before May 30.
After the deal, Gazprom would control 51 percent in SeverEnergia, while Enel and Eni would have 20 percent and 30 percent, each to each. The venture will produce and sell gas in Russia.
Among the other deals, Eni also signed a protocol with Rosneft and agreed to projects with state power exporter Inter RAO.
