Libya to Reassess Italy Oil Deals Amid Government Row

LONDON, (Dow Jones Newswires), May 09, 2008

Libya is reassessing some of its oil deals with Italian energy company Eni SpA (E) as tensions mount between the two nations following the new Italian government's high-level appointment of a right-wing politician who has angered the North African country in recent years.

Conservative Silvio Berlusconi, the Italian billionaire, was sworn in for a third stint as prime minister Thursday along with his appointed ministers, who include Roberto Calderoli, of the anti-immigrant Northern League party that is part of Berlusconi's coalition government.

Calderoli, who has been appointed with the task of reducing government bureaucracy, provoked protests in the Libyan coastal city of Benghazi in 2006 after appearing on Italian television with a T-shirt that made fun of the Prophet Mohammed. Several Libyans died during those protests. Calderoli later resigned as reforms minister following the incident.

"There's a reevaluation happening now on deals with Eni," a senior official with the Libyan National Oil Co., or NCO, told Dow Jones Newswires. "The Libyan government is very angry with what is happening in Italy with Calderoli" after Libya urged Berlusconi not to appoint Calderoli, the official said.

Shokri Ghanem, head of the Libya's NOC, wouldn't confirm or deny Libya is reevaluating deals signed with Eni, but said the government was upset with Calderoli's appointment.

"There are many people upset about the situation in Italy but I cannot comment further about what's happening here at this time," Ghanem said.

Italian online energy news service Staffetta Quotidiana reported Friday, citing Libyan diplomatic sources, that Libya could take measures against Eni as a result of Calderoli's appointment in the new government. These measures may include scrapping a strategic accord between Eni and NOC, Staffetta reported.

The state Libyan oil company awarded Eni, which is about 30% state controlled, crude oil and natural gas concessions in October. The senior NOC official said those concessions could be at risk, but declined further comment.

Eni, the biggest foreign oil company in Libya with around 250,000 barrels a day of production, declined to comment on the matter.

Seif al-Islam Gadhafi, a son of Libyan leader Moammar Gadhafi, warned in early May of "catastrophic consequences" in relations between Libya and Italy if Calderoli took a role in the new Italian government.

Calderoli further inflamed Muslims inside and outside Italy in 2007 after he threatened to walk a pig, a detested animal in Islam that is seen as being too dirty to touch or to consume, near the site of where a mosque was to be built. Meanwhile, Reuters news service reported Friday Libya has told the Italian government it will no longer help stem the tide of illegal African migrants to Italy and other European states because of insufficient support from Europe, including Rome.

"Libya is no longer responsible for protecting Italian coasts from illegal migrants...because the Italian side did not make good on its commitment to provide support for Libya," the Libyan Interior Ministry said in a faxed statement to Reuters.

Buoyed by high oil tax revenues and its reentry into the international community in recent years after giving up its nuclear program, Libya hasn't been shy about asserting itself on the international stage.

Libya, a member of the Organization of Petroleum Exporting Countries and former Italian colony, caused a ruckus a couple of weeks ago at the U.N. after its deputy permanent U.N. representative compared the situation of Palestinians in Gaza with the Holocaust. That led several Western diplomats to walkout of the U.N. council chamber.

Copyright (c) 2008 Dow Jones & Company, Inc.