During a four year strategic plan, Italian energy major ENI will spend €900 million per year on exploration activities, targeting approximately 2 billion barrels of oil equivalent (boe) of new equity resources at approximately $2 per barrel and continuing to implement its dual exploration model, the company’s CEO, Claudio Descalzi, said in New York.
ENI expects to deliver production growth of 3.5% per year during the Plan period, fueled by starting and ramping up new projects, which ENI expects to account for approximately 700,000 boe per day by 2021, and optimisation activities, which Eni expects to account for 200,000 boe per day by 2021, Descalzi said.
Production in 2018 is expected to increase 4% from 2017. This figure, which is above the original guidance, takes into account the recent entry into the United Arab Emirates and the sale of 10% of Egypt’s Zohr. ENI’s strong asset base allows the company to target an annual average production growth rate above 3% for the long term, reaching more than 2.3 million boe per day by 2025, he said.
The ENI CEO said the company expects upstream growth to continue to generate barrels with ever-higher margins and the sector’s Capex cash neutrality to drop to approximately $40 from 2018. Eni expects the upstream sector will generate approximately €22 billion of free cash flow during the Plan period.
According to Descalzi, the transformation and restructuring of the mid-downstream businesses have had positive results, increasing operating cash flow by €12 billion in the period 2015-2017 compared with the previous three years.
The Gas & Power sector achieved in 2017 a structural positive result. In this sector, ENI has successfully pursued the renegotiation of long-term gas supply contracts and almost fully recovered the take or pay contracts, Descalzi said.
The Gas & Power sector will continue to grow due to the accelerated development of the LNG portfolio, which is set to reach 12 million tons per year in contracted volumes by 2021 and 14 million tons by 2025, and through equity enhancement, which is due to rise from 30% in 2017 to 70% in 2021; improved profitability of the gas portfolio in Europe; and retail sector growth in Europe, with a forecast of 11 million customers by 2021, an increase of 25% compared with 2017, Descalzi said.
In Refining & Marketing, ENI has halved the refining breakeven margin from $7.8 per barrel in 2013 to less than $4 today. The company expects strong growth in the sector’s EBIT, up to €900 million at the end of the Plan period, as well as free cash flow of more than €2 billion during the Plan period, Descalzi said.
“Over the past four years, we have strengthened the company, operationally and financially, implementing a fast and effective strategy and anticipating the fall of the oil price. In a period of very low prices, we have increased our hydrocarbon production and restructured our mid-downstream businesses to achieve positive structural results after years of losses, all while generating substantial cash and reducing costs and investments,” Descalzi said. “We have reduced our cash neutrality from $114/barrel in 2014 to $57/barrel in 2017,” he said. “Based on the trend in the first quarter, with a 4% growth year on year, we are perfectly in line with our previously announced growth target for 2018,” he added.
According to Descalzi, ENI’s Plan also includes a path to decarbonisation with a clear and defined climate strategy integrated with the company’s business model. “That strategy is based on the following drivers: lowering CO2 emissions across all our operations; our “low carbon” oil and gas portfolio, which is characterised by conventional projects with low CO2 emissions; developing green businesses through our growing commitment to renewables; and our commitment to scientific and technological research. This approach will allow us to reduce overall upstream unitary GHG emissions by 43% by 2025 compared to 2014,” Descalzi said.
In the field of renewable energy, ENI’s model is based on integration with existing assets that can generate additional value due to industrial, logistical, contractual and commercial synergies, Descalzi said, adding that this approach will enable ENI to increase the internal profitability rate of its solar and wind energy projects to approximately 10%.
Including projects already identified or under way, ENI expects to develop approximately 400 MW of new electricity capacity in the next two years, increasing to 1 GW by 2021 with the investment of €1.2 billion, and up to 5 GW by 2025, especially in countries where it is already present.
Lastly, he said, ENI is implementing a deep digitalisation process throughout all the company’s activities, which includes more than 150 projects along the value chain. “This will allow by the end of the Plan period a 7% reduction of production costs, a 30% decrease in unproductive time during operations, and a 15% reduction in execution of exploration activities,” he said.
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