Italian oil and natural gas company Eni SpA (E) Wednesday said it agreed to expand energy ties with Brazil's Petroleos Brasileiro SA (PBR), reinforcing a relationship at a time when U.S. and European oil companies are struggling to get access to oil reserves globally.
No financial terms were disclosed but the deal comes after Petrobras' recent discoveries of potentially giant volumes of crude oil in Brazil, which Eni and other foreign oil companies have expressed interest in codeveloping.
As part of the deal, which was signed here on the sidelines of an industry conference, Eni will make available to Petrobras its heavy oil technology and both companies will work together on developing international biofuel projects, Eni Chief Executive Paolo Scaroni said.
The deal is the first in which Eni will work with another major energy company on biofuels.
Eni's heavy oil technology allows for the conversion of thick, heavy grades of crude, such as the kind found in Brazil that are costly to process.
"We are very pleased with this deal," Scaroni said, but added that he was under no illusions that the Rome-based company would be given access to recent Brazilian oil discoveries.
"Hydrocarbon production (in Brazil) will continue to grow due to encourage exploration results, particularly offshore," Scaroni said.
Eni already has four offshore exploration blocks in Brazil and plans to conduct a joint study with Petrobras on the possible options for using the gas reserves Eni has discovered in Brazil.
Petrobras announced in 2007 the discovery of one big oil field with as much as 8 billion barrels and said earlier this year that a second discovered field could be even bigger.
There are also indications the discoveries may be one massive structure, though analysts say the fields' tough-to- penetrate "presalt" geology and high water content will make the fields among the costliest in the world to develop.
The deal signed Wednesday also marks Eni's intentions to expand its presence in biofuels and particularly in ethanol and biodiesel, a small but fast-growing segment of the energy market.
The international focus of the two companies' cooperation on biofuel projects will be Africa with an emphasis on the Republic of Congo where Eni already operates heavy oil and biofuel projects.
Brazil is the world leader in producing gasoline from sugar cane, but Petrobras and Eni will look at producing diesel from palm trees, an area Eni has developed expertise in through its Congo operations.
CEO Scaroni said the two companies planned to stick to so-called "non-eatable" biofuels amid public concern that food items like corn, which is used to produce ethanol, an alternative to oil-based fuel products, are helping increase global food prices.
Scaroni reiterated that Eni was hopeful that the consortium it's been leading in Kazakhstan will meet the new 2013 target for starting production at the country's long-delayed Kashagan oil field.
He also said Eni had no plans to move forward with work on two oil blocks in Iran amid U.S. and European efforts to isolate Iran politically and economically amid its refusal to halt work on its nuclear program.
"We do not want to do anything that's unacceptable to the international community," Scaroni said. Eni signed a deal for the Iranian oil blocks in 2001.
Scaroni told an Italian newspaper in a story published Wednesday that Eni stood to lose between $2 billion and $3 billion if it was to leave Iran today, due to the money it has invested in its Iranian projects.
Eni was also compensated about $1 billion by the Venezuelan government after it nationalized an Eni-operated heavy oil block in 2006, and not $700 million as originally reported in February, Scaroni said.