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    Eni's Oil Output to Decline from 2025


Gas will account for a larger share of a shrinking portfolio.

by: William Powell

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Eni's Oil Output to Decline from 2025

Italian energy producer Eni expects its oil and gas output grow by 3.5%/yr and to peak in 2025, it said February 28, as it set out its four-year investment plan (2020-2023) and long-term plan to 2050 that focuses on high-value, short-payback projects. These will cost it around €32 ($34.8)bn by 2023, of which the upstream will account for around €24bn. 

CEO Claudio Descalzi said the company would "reinforce its role as a global player in the world of energy with renewables and circular economy activities. These nascent businesses will develop strongly and be highly connected to our existing businesses. The production of oil and gas is expected to reach a plateau in 2025 followed by a flexible decline in the following years mainly for the oil component."

By 2050, gas will account for about 85% of its production and it has fixed a target of an 80% reduction in net greenhouse gas emissions of its energy products by 2050, which exceeds the 70% indicated by the International Energy Agency.

Claiming to have stolen a march on its peers, he said the long-term plan combines "the objectives of ongoing development in a fast changing energy market and a significant reduction in our carbon footprint, a combination considered impossible by many. We will be the first in the industry to provide a business strategy to address these issues."

UK major BP, which announced a major strategic overhaul earlier this month with a net-zero carbon goal by 2050, will not provide full details of what exactly is involved until early autumn. Spanish Repsol is also changing tack, but has not yet said how it will achieve its aims.

Eni said its plan "is characterised by a high level of flexibility with around 60% of investments not yet committed in 2022-23."

The upstream investment plan will be "highly diversified in terms of geographical footprint, thanks to the developments in the Middle East, Africa, Norway and Mexico. The current portfolio of upstream projects in execution has a breakeven price of $23/barrel and an internal rate of return of about 25%."

In line with these medium and long-term objectives as well as the company's decarbonisation process, Eni plans to spend €4bn in renewables, energy efficiency, circular economy and offsetting flaring, which is 30% more than in it its last plan.

Assuming a dated Brent crude price of $60/barrel and gas at the Italian PSV hub at €150/'000 m³, Eni said it expects "strong growth in cash generation for the next four years. In particular, by 2023, operating cash flow will grow by more than €3bn compared to 2019 thanks to the solid contribution of all its businesses."