Eni to Bear Down on Long-Term Gas Contracts
Eni expects the company’s Europe-based midstream Gas & Power division to complete renegotiation of its long-term gas purchase contracts within 1H 2016.
Presenting the company’s 2016 strategy plan in London, CEO Claudio Descalzi said that renegotiation of these contracts would enable them to be “fully aligned to market conditions.”
He said Eni’s G&P division was “close to breakeven” in 2015, and added that he expects it to be earnings (Ebit) positive in 2016, and earning 900m euros by 2019.
The company’s 2015 G&P result would have been positive, but for a damaging arbitration ruling against Eni over its Libyan gas sale contract to Edison. In its statement late February, law firm Quinn Emanuel said the ruling was “one of the largest gas price review arbitrations in Europe, involving the two main players of the Italian gas market (Edison is second and Eni is first). Further, the billion-dollar result obtained by Edison is amongst the largest amounts ever awarded in a price review arbitration.”
In the upstream, Descalzi said average new projects breakeven had been reduced from an average of $45/b in 2014 to $27/b in 2015 – the latter made up of an average $15/b onshore and $30/b offshore.
Among major upstream project start-ups planned in 2016-17, Descalzi cited the giant Kashagan onshore oil project in Kazakhstan in 2H2016, and the OCTP offshore oil and gas project (with Vitol) in Ghana, and the much heralded supergiant Zohr gas field offshore Nile Delta in Egypt both in 2H2017. He said that Zohr had gone to FID in barely a year after discovery.
He said FIDs are still planned on the Coral floating LNG offshore Mozambique this year, “hopefully by June”, followed the phase one of the onshore Mamba LNG project in the same country in 2017. However Eni has been here before – it expected FID on Coral already around June of last year, at the point when world oil and gas prices began steeply declining.
Eni is projecting a world oil price averaging $65/bin 2019; the current price is around $40/b.