Eni sets production growth target of 3.5%/year

Eni SPA plans to increase its production by 3.5%/year over the next 3 years despite the uncertainty surrounding the economic downturn and energy markets.

Uchenna Izundu
OGJ International Editor

LONDON, Feb. 16 -- Eni SPA plans to increase its production by 3.5%/year over the next 3 years despite the uncertainty surrounding the economic downturn and energy markets.

It will invest €48.8 billion in 2009-12, slightly less than in its 2008-11 plan; exploration and production will cost €34 billion.

The company said it would aim for a reserves replacement ratio of 130% during 2009-12 and after that would maintain an average production growth of 3%/year to 2015 by stepping up activities in Africa, OECD countries, and Central Asia-Russia.

"More than 90% of production and investments to 2012 will be concentrated in these areas," Eni said.

The company is confident it can achieve these figures because of the quality of its portfolio in low-cost production areas with large projects that have economy of scale benefits.

Paolo Scaroni, chief executive of Eni, told investors in London, that this year its production is expected to be above 1.8 million boe/d, based on an oil price of $43/bbl. In 2012, this will exceed 2 million boe/d, based on a $55/bbl scenario.

In the next 4 years, more than 500,000 boe/d of new production will start, 85% of which is related to projects that will be profitable even if oil prices are below $45/bbl.

By 2012 the company expects to have international gas sales of 124 billion cu m with an average growth of 7% a year, thanks also to the contribution of Distrigas.

"Beyond continuing to grow its market share in core European countries, Eni will increase sales in the US, thanks to the monetization of the gas produced in the Gulf of Mexico," the company added.

But its capital spending on refining and marketing will be slashed by 30% to €2.8 billion under the strategic plan because of the weak outlook and so it can improve efficiency. It also will reduce its workforce in this area by 6% in Italy.

Downstream asset sales
Eni is considering selling some of its downstream assets in Italy to help it ride out the period, including its 84,000 b/d Livorno refinery on the Tuscan coast in northern Italy.

Angelo Caridi, head of refining and marketing at Eni, said at the briefing in London that falling global demand, increasing energy efficiency, and the growth of biofuels were behind the poor outlook.

The amount of high value middle distillates, such as diesel fuel, will rise to 45% of refining output in 2012 compared with 40% in 2008.

"In refining, Eni plans to increase the complexity and the yield in medium distillates, exploiting proprietary technologies," it said.

This year, Eni plans to start up 3 hydrocracking units and in 2012, a new plant at its Sannazzaro refinery, which would account for the majority of investments in this area under the plan.

The company saved over €1 billion at the end of 2008 through its efficiency program. This figure is expected to be doubled by 2012, both in real terms and versus the 2005 baseline.

Contact Uchenna Izundu at uchennai@pennwell.com.

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