Talks

Eni’s strategic plan

 By Kevin Baxter

Every year in March Eni hosts an event where members of the financial community and journalists are invited to hear the CEO Claudio Descalzi present the company’s strategic plan…

Traditionally London hosted the Eni Strategic Plan presentation, but this year Milan was the host city and guests were treated to a slightly different take on what Eni will be doing between now and the end of 2022.
Milan is also home to Eni’s headquarters so tours of the company’s research and development facilities were also on offer so attendees could see for themselves some of the incredible work Eni’s research scientists and engineers are doing.
However, while this was a welcome distraction, bankers and analysts had travelled from across Europe to hear Mr Descalzi explain exactly what Eni are going to doing in order to continue the company’s journey to becoming a world-leading global energy provider.

Upstream                                                         

The production of oil and gas continues to form the bedrock of Eni’s operations and its exploration activities are well respected across the industry. What Eni’s plans were for the next four years in this vital business unit was what many members of the financial community in attendance had travelled to Milan to hear.
Mr Descalzi explained that Eni’s future plans will be built on the strong foundations already established as well as embrace new regions, citing the series of exploration deals Eni signed across the Middle East in January as proof of intent.
To fully capitalise on the truly global footprint Eni’s upstream operations now encompass, three strategic hubs will be created that will drive growth in the upstream sector: the Middle East, Norway and Mexico.
To ensure Eni’s geographical diversification plan is a success, Mr Descalzi revealed that annual spending on drilling will reach €900m and 40 new wells will be drilled each year.
With the expertise and investment firmly in place, the Eni CEO went on to predict that new discoveries will total 2.5 billion barrels of oil equivalent (BOE) by the end of 2022, underlining the confidence the company has in its exploration capabilities.
On top of this commitment to exploration, Mr Descalzi said total capital expenditure in the upstream business unit will be €6.5bn per year with about 57% of that figure committed for development projects and 32% going on maintaining and expanding existing assets.
However, despite the huge amounts being invested back into the upstream business, Mr Descalzi reassured the audience that fiscal responsibility remained a cornerstone of Eni’s strategy and that the breakeven price for every barrel of oil equivalent produced by the Eni remained less than $30.  The watching bankers were also cheered by the revelation that Eni was still on target for the upstream business unit generating €22bn of free cash flow by the end of the plan.

Refining & Marketing and Chemicals

With so much focus in recent years concentrating on Eni’s success in the upstream sector, the downstream business units had been quietly working on their own evolution.
A great example of this hard work is the $3.3bn acquisition of the Ruwais refinery complex in Abu Dhabi that was agreed in early 2019. Mr Descalzi underlined the importance of this deal, saying that it will help to boost total refinery capacity 40% by 2023.
While the Abu Dhabi acquisition will form the cornerstone of the refinery business unit, 2019 will also see the full operations of our biorefineries. Mr Descalzi also revealed that the Gela biorefinery is expected to start in few weeks and the second phase of our Venice biorefinery will be completed by 2021. This will see our biorefinery capacity grow to 1 million TPA.
Versalis, Eni’s chemical business, is set to play a pivotal role in the company’s commitment to embracing the Circular Economy model. It was also revealed that Versalis will continue to optimise integration and look to increase its commercial presence in key markets in the Far East and Americas.

Gas and Power

The last few years has witnessed Eni carry out an extensive restructure of the Gas & Power (G&P) business unit and Mr Descalzi told guests at the event that the company was now in a strong position for solid growth.
Eni has worked hard to increase its upstream gas resources and the success of this strategy meant that the company has had to develop its liquefied natural gas (LNG) capabilities in order to fully capitalise on the additional volumes now being produced.
Attendees were told that LNG will play a crucial role over the next seven years and that Eni the ramp up of its portfolio to the extent where capacity will reach 14 million tonnes per annum (TPA) of contracted volumes in 2022 and 16 million TPA in 2025.
Referring to Eni’s retail arm, Gas e Luce, Mr Descalzi said that it is on course to double the 2018 EBIT result by the end of our plan, reaching €500m.

New Energy Solutions

As Eni continues to evolve into a fully diversified energy provider a vital part of that process is developing sustainable renewables assets.
Mr Descalzi said that Eni is planning a total of 60 brownfield and greenfield projects by 2022 with a total capacity of 1.6GW. This will increase to 5GW by 2025.
While the renewables business is still very much in its early development phase, Mr Descalzi reassured the watching audience that Eni still expects the unit to deliver stable cash flows in the long term as well as offer considerable operational cost reductions by replacing gas consumption.

Decarbonisation process

Eni is firmly committed to reducing its carbon footprint and the CEO used the event to unveil some exciting new developments that seemed to capture the imagination of everyone in attendance.
Mr Descalzi revealed that Eni will achieve a net zero emissions in our upstream business by 2030 and will gas process flaring and reduce methane leakage by 80% by 2025.
To complement this, Eni will also roll out a plan to build a series of huge forests totalling 81,000 square kilometres across African countries including Mozambique, South Africa, Zimbabwe and Ghana. The forestation plan is a first for any oil company and is the equivalent of covering a quarter of Italy in woodland and is an industry-first.
Mr Descalzi stressed that Eni is also fully committed to the Circular Economy model of maximising resources and minimising waste. The circular approach is already being used to improve the useful life of industrial sites and maximize the use of waste as feedstock.
A total of 28 million tonnes of CO2 sequestration is planned by 2030.

READ MORE: Eni’s big results in 2018 by Kevin Baxter

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Kevin Baxter