The Mellitah treatment plant in Western Libya. (Eni)
Eni is ramping up gas volumes to Italy through the GreenStream pipeline with the restart of production at the Bahr Essalam field offshore Libya on Wednesday.
Gas production from Bahr Essalam is set to begin at 4 to 5 million cubic metres per day (MMcm/d) and gradually increase to 11-13 MMcm/d during November, when all 15 wells on the Sabratha platform in the Mediterranean Sea will be back in use. The company also said that additional subsea wells will be added in 2012 to the field. It is operated by Mellitah Oil & Gas, a 50/50 joint venture between Eni and Libya’s state-owned National Oil Company (NOC).
According to the Italian gas transport operator Snam Rete Gas, 7.3 MMcm of gas were received from Libya on Wednesday. The order for Thursday is 8.4 MMcm. Gas deliveries through GreenStream were restarted on 13 October, using gas from the Wafa field, after the outbreak of hostilities in Libya in February forced Eni to shut the pipeline down. The 510 km pipeline, which moves gas from the Mellitah gas treatment facility in western Libya to the Gela gas terminal in Sicily, has a maximum capacity of 9 billion cubic metres per year.
Before the February shutdown, Libya was Italy’s third-biggest supplier of gas after Russia and Algeria, providing around 12-15% of the market. All of Eni’s producing facilities came to a halt due to the conflict, with the sole exception of the Wafa field, which produced enough gas to power domestic power stations only.
Full-scale resumption of Libyan gas delivery to Italy via the GreenStream pipeline will inevitably reduce Italy’s need for Russian gas, which was a major beneficiary of the fall in Libyan volumes. However, gas demand in Italy is not as strong as some had expected.
“The restart of operations is timely in terms of season, but gas demand projections for Italy are not good,” Fitch Ratings analyst Francesca Fraulo told Interfax. “The loss of GreenStream volumes turned out to be not as strategic as we were expecting at the beginning of the year.”
Even so, other analysts argue that Eni will be keen to ramp up GreenStream volumes as quickly as possible. “I would expect them [Eni] to ramp up production as quickly as possible,” Colin Smith at VTB Capital told Interfax. “Eni has said that the price it pays for GreenStream gas is lower than other supply sources and the company would also want to increase Libyan gas supplies to support the new Libyan government and protect its investment position in Libya.” Eni is the largest foreign oil and gas producer in Libya.
Eni has been lucky in the timing of GreenStream’s shutdown, with Italian gas demand low and an overhang of undrawn take-or-pay volumes from Russia. “Eni’s decision on the suspension of GreenStream flows may also have been commercially motivated, as the move was seen as giving the Italian company the opportunity to balance the shortfall in Libyan supplies with the estimated 5 bcm of prepaid volumes from Russia’s Gazprom,” a report called The Implications of the Arab Uprisings for Oil and Gas Markets from the Oxford Institute of Energy Studies said in September.
It added: “The shortfall relates to volumes from Gazprom that Eni had been unable to take the previous year, due to lower post-recession demand.”
Eni ramps up GreenStream volumes to Italy
The Mellitah treatment plant in Western Libya. (Eni)
Eni is ramping up gas volumes to Italy through the GreenStream pipeline with the restart of production at the Bahr Essalam field offshore Libya on Wednesday.
Gas production from Bahr Essalam is set to begin at 4 to 5 million cubic metres per day (MMcm/d) and gradually increase to 11-13 MMcm/d during November, when all 15 wells on the Sabratha platform in the Mediterranean Sea will be back in use. The company also said that additional subsea wells will be added in 2012 to the field. It is operated by Mellitah Oil & Gas, a 50/50 joint venture between Eni and Libya’s state-owned National Oil Company (NOC).
According to the Italian gas transport operator Snam Rete Gas, 7.3 MMcm of gas were received from Libya on Wednesday. The order for Thursday is 8.4 MMcm. Gas deliveries through GreenStream were restarted on 13 October, using gas from the Wafa field, after the outbreak of hostilities in Libya in February forced Eni to shut the pipeline down. The 510 km pipeline, which moves gas from the Mellitah gas treatment facility in western Libya to the Gela gas terminal in Sicily, has a maximum capacity of 9 billion cubic metres per year.
Before the February shutdown, Libya was Italy’s third-biggest supplier of gas after Russia and Algeria, providing around 12-15% of the market. All of Eni’s producing facilities came to a halt due to the conflict, with the sole exception of the Wafa field, which produced enough gas to power domestic power stations only.
Full-scale resumption of Libyan gas delivery to Italy via the GreenStream pipeline will inevitably reduce Italy’s need for Russian gas, which was a major beneficiary of the fall in Libyan volumes. However, gas demand in Italy is not as strong as some had expected.
“The restart of operations is timely in terms of season, but gas demand projections for Italy are not good,” Fitch Ratings analyst Francesca Fraulo told Interfax. “The loss of GreenStream volumes turned out to be not as strategic as we were expecting at the beginning of the year.”
Even so, other analysts argue that Eni will be keen to ramp up GreenStream volumes as quickly as possible. “I would expect them [Eni] to ramp up production as quickly as possible,” Colin Smith at VTB Capital told Interfax. “Eni has said that the price it pays for GreenStream gas is lower than other supply sources and the company would also want to increase Libyan gas supplies to support the new Libyan government and protect its investment position in Libya.” Eni is the largest foreign oil and gas producer in Libya.
Eni has been lucky in the timing of GreenStream’s shutdown, with Italian gas demand low and an overhang of undrawn take-or-pay volumes from Russia. “Eni’s decision on the suspension of GreenStream flows may also have been commercially motivated, as the move was seen as giving the Italian company the opportunity to balance the shortfall in Libyan supplies with the estimated 5 bcm of prepaid volumes from Russia’s Gazprom,” a report called The Implications of the Arab Uprisings for Oil and Gas Markets from the Oxford Institute of Energy Studies said in September.
It added: “The shortfall relates to volumes from Gazprom that Eni had been unable to take the previous year, due to lower post-recession demand.”