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31 Oct, 2008 13:19

Libyan leader’s visit comes with upside for business

Libyan leader Moammar Gadhafi is visiting Moscow for the first time in 25-years, seeking to expand an energy and military partnership. Gadhafi is expected to sign a 2 billion dollar contract on weapon supplies.

Russia has already bolstered relations with Libya – earlier this year writing off its $4.5 Billion debt.  In exchange Moscow won lucrative business deals mainly in energy.  Libya is the fourth largest gas supplier in Africa – and awarded Gazprom several licenses to explore potentially gas-rich areas.

Now the company is seeking approval for a 33 percent stake in the Elephant field – as part of an asset swap with Italian energy firms.  Aleksandr Nazarov, analyst at Metropol IFC says agreement is crucial for the Russian gas major.

“Libya has the fourth largest gas reserves in Africa. Europe regards African gas as an alternative to supplies from Russia. So a partnership with Tripoli is crucial for Gazprom to maintain a leading position in gas supplies to the EU.”

To transport African gas to Europe, Gazprom wants to build a pipeline from Libya under the Mediterranean sea. Moreover Gazprom, is in talks with Nigeria to pick up its gas, and pipe it across the Sahara. The 13 billion -dollar pipeline will travel through Libya and then to Europe, according to Pavel Sorokin, analyst at UniCredit Aton.

“It is a green field project so they will need to start from scratch. And that will shatter the existing way of things in the region. And it’s a hard thing. So this needs a lot of political investment and financial investment. And is there a point in all that? That’s what Gazprom is trying to prove.”

Apart from traditional weapon contracts, Russia hopes to agree on the construction of 554-kilometre of track – to be laid by Russia's rail monopoly between the Libyan cities of Surt and Benghazi.

Russian oil producers cut capital expenditure while looking for taxation changes

China firms up on Russian energy option

Energy week sees focus on investment in gas production