Eni’s eastern promise

 By Eniday Staff

The ink in Chief Executive Officer Claudio Descalzi’s pen is running low after a January signing spree which has seen Eni sign a multi-billion dollar refinery deal in the United Arab Emirates (UAE) as well as secure eight new exploration and production (E&P) deals across the Arabian peninsula…

New agreements in the Arabian Peninsula

The agreements have been designed to strengthen Eni’s position in the world’s most prolific oil production region as well as offer the other partners access to the company’s vast marketing network world-leading research and development expertise.

The Abu Dhabi deals

On January 27, Mr Descalzi travelled to Abu Dhabi to sign a $3.3 billion share purchase agreement that secures a 20% share in the refinery assets of the Abu Dhabi National Oil Company (ADNOC).
ADNOC operates three domestic refineries with a combined capacity of over 900,000 barrels a day (B/D). The significance of the deal is underlined by the fact that it increases Eni’s global refining capacity by 35%.
Mr Descalzi had already visited Abu Dhabi on January 12 to sign concession agreements for two offshore blocks with the Abu Dhabi National Oil Company (ADNOC).
The two offshore concessions were the first to be offered for commercial bidding by ADNOC. Eni will be the operator of both blocks with a 70% stake, but are joined by Thailand’s PTT Exploration and Production Company Limited (PTTEP) who have the remaining 30%.
The exploration phase for the concessions, which cover 8,000 square kilometres, is nine years which will then be extended to 35 years if commercially viable volumes of oil and gas are discovered. An initial $230 million will be invested by the consortium partners during the exploration phase. ADNOC will immediately assume a 60% stake if either block moves to the commercial production phase.

Why Abu Dhabi?

From a downstream perspective, Abu Dhabi has worked hard over the last decade to ramp up its refining capacity and has had great success in revamping and expanding its operations at Ruwais. The emirate is also close to some key markets in Asia and Africa including the Indian subcontinent.
ADNOC is now emerging as one of the most progressive oil producers in the Middle East. The company has not only opened up several new exploration blocks to commercial bidding, but has also restructured its business model to enable it to embrace innovation and new technologies.
From Eni’s perspective, the refinery deal is a massive investment that is aimed at lengthening its value chain. After years of upstream success, the company is looking to diversify its geographical portfolio and this agreement goes a long way to achieving this aim.
Abu Dhabi also offers a stable political climate and a well-established oil industry to back up Eni’s exploration work. Eni already has 10% stake in ADNOC’s Umm Shaif and Nasr concession, 5% in the offshore Lower Zakum concession and 25% in the Ghasha concession. Adding to this portfolio with the new deals will allow Eni to combine costs and make huge operational savings.
The UAE also offers a huge domestic market for any potential commercial volumes of oil and gas  due to its extensive refining, petrochemical and industrial sectors and growing power sector.

The Takreer refinery in Ruwais

The Sharjah deals

With the ink still drying on the ADNOC contracts signed on January 12, Mr Descalzi remained in the UAE to sign three more deals in the Emirate of Sharjah on January 13 that will see Eni focus on onshore oil and gas exploration.
Two of the concessions, which will cover an area of over 1,600 square kilometres, will be operated by Eni with a 75% stake while the remaining 25% being held by the Sharjah National Oil Corporation (SNOC). A smaller concession of 264 square kilometres will be shared equally between the operator SNOC and Eni.

Why Sharjah?

Oil and gas exploration has been conducted in Sharjah since the 1930’s, but with very limited success. The emirate currently has three small gas condensate fields in operation meaning that there is potential for much more. This indicates that Eni’s extensive exploration expertise could bring success on the onshore concessions and hugely strengthen Sharjah’s production portfolio.
Sharjah’s infrastructure is impressive for such a relatively small emirate and three of the UAE’s finest deep-water ports are located here. Added to this is Sharjah’s proximity to large industrial and commercial areas in Dubai meaning that any successful exploration efforts will have some attractive markets if any of the hydrocarbon resources are eventually produced.

The Bahrain deal

Bahrain was where oil production first began in the Middle East almost 100 years ago and while output has now fallen to way below previous levels, there are many who feel that this tiny state in the Arabian Peninsula still has a lot to offer.
Eni agrees and on January 13, Mr Descalzi travelled to Manama to sign a Memorandum of Understanding with the National Oil and Gas Authority of the Kingdom of Bahrain (NOGA) that aims for the partners to eventually pursue petroleum exploration at an offshore block that covers 2,800 square kilometres in the future.

Why Bahrain?

Bahrain is small, but has been a leader in the Middle East in both oil and gas production as well as developing its industrial base. The country is located close to the regional powerhouse of Saudi Arabia’s Eastern Province which is home to Jubail, one of the world’s largest industrial cities.
After a period of political turmoil at the start of the decade, Bahrain is now focusing on the future and is looking to bolster its roster of technical partners, especially large international oil companies like Eni who can add value in terms of technical knowledge and investment capital.

The Oman deals

Not content with signing a mere six deals in two days, Mr Descalzi travelled to Oman on January 14   to put pen to paper on two more.
The first was a exploration and production sharing agreement (EPSA) between Eni and the state-owned Oman Oil Company Exploration and Production (OOCEP) for Block 47, an onshore concession with an area of around 8,524 square kilometres. Eni will operate the block with a 90% share while OOCEP holding the remaining 10%. Exploration will start in 2019.
This was followed by a head of agreement (HoA) deal signed with Oman’s Ministry of Oil & Gas and will see Eni team up with BP in a 50/50 partnership to carry out exploration at the onshore Block 77 which covers 3,100 square kilometres. An EPSA is expected to follow shortly.

Why Oman?

Despite its relatively low-profile, Oman is one of the world’s top 20 oil producers with output around the 1 million barrels a day mark. The sultanate has also been a pioneer in developing enhanced oil recovery techniques and is eager to bolster its gas production to underpin its ambitious industrial diversification plans.
However, much of Oman’s untapped hydrocarbon resources are unconventional and require cutting edge technology and expertise. This makes that the country a natural partner for a leading technology innovator such as Eni.

READ MORE: Discovering Zohr by Eniday Staff

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Eniday Staff