OREANDA-NEWS. February 17, 2011. In the presence of Russian President Dmitry Medvedev and Italian Prime Minister Silvio Berlusconi a Farm-out Agreement for the Elephant project Production Sharing Agreement (PSA) has been signed in Rome today between Alexey Miller, Chairman of the Gazprom Management Committee and Paolo Scaroni, Chief Executive Officer of Eni.

Pursuant to the document, Gazprom will acquire 50 per cent of Eni's stake in the consortium participating in Libya's oil field development under the PSA terms, that is 33.33 per cent of the international consortium. The asset to be acquired is valued at some USD 163 million.

Once signed, the Farm-out Agreement will be submitted to the Libyan party for approval.
Background

The Elephant field containing 110 million tonnes of estimated recoverable oil reserves is located in western Libya. The maximum annual oil output is expected to reach some 6 million tonnes. The field infrastructure is fully developed and comprises power supply, oil treatment and transmission facilities to the oil export terminal.

In November 2006 Gazprom and Eni inked the Strategic Partnership Agreement providing for the parties to elaborate investment projects for gas exploration and production in Russia and third countries.

In April 2007 a supplementary agreement was signed enabling Gazprom to acquire Eni's production assets located abroad.

In June 2009 the parties coordinated the Basic Terms and Conditions for the purchase and sale transaction defining the stake held by Eni in Libya's Elephant oil project as the first asset to be purchased by Gazprom.

Gazprom neft will acquire the stake and join the Elephant project. The company will be entitled to delegate its managers and engineers to the project company within the quota agreed with the Italian party.