Eni CEO Warns About Libya Situation

Paolo Scaroni, the CEO of Eni SpA E, Italy's largest oil company, warned against the dangers of allowing the situation in Libya to transform Africa's third-largest oil producer into a failed state along the lines of Somalia.

“What would be the worst potential outcome is to have a kind of Somalia situation in Libya that has no government for a long period of time,” Scaroni said in an interview with Bloomberg Television. Scaroni added that if that scenario plays, the problem would affect Europe at large, not just Eni.

Eni, the Western oil major with the largest presence in Libya and all of Africa, has seen its Libyan output plunge to 100,000 barrels of oil equivalent per day from 270,000 barrels per day before the start of political violence in the country. The company said higher oil prices have helped make up for the lost Libyan production, according to Bloomberg News.

Credit default swaps used by traders to ensure against default on Eni-issued debt have surged to over 100 basis points this week.

Eni is no stanger to volatile countries as the country is counting on projects in Angola, Iraq, Russia and Venezuela to help it boost output by 3% or more over the next four years. The company is planning capital expenditures of $74 billion over the next three years.