Italian oil company Eni has set a $7 billion divestment target for the period between 2016 and 2019, slashed the breakeven oil price and said the industry needs to understand that the low oil prices are actually not low, but normal.
The company’s CEO Claudio Descalzi said that in 2015, Eni achieved 90% of the previous 4-year plan disposal target.
“We have now increased our 4-year target and will dispose of another 7 billion euros of assets by 2019, mainly through the dilution of our stakes in recent and material discoveries as part of our dual exploration model strategy,” Descalzi said.
Descalzi was referring to the Zohr discovery in Egypt and the giant gas discoveries it recently made offshore Mozambique. For example Eni, which recently made a step towards the development of the Coral FLNG project in Mozambique, said it would wait to divest some of its stake in the Mamba discovery before proceeding with an FID there.
Production on the rise
Also, in its four year plan Eni revealed it expected production to grow of 13% over the plan period, despite an 18% reduction in Upstream CAPEX. The rise in production is expected to be achieved mainly through the ramp-up and start-up of new projects with a total contribution of around 800 kboed in 2019.
Worth noting, Eni, which discovered Zohr in August 2015, expects to bring the field to production later in 2017. In the past eight years Eni discovered 11.9 billion barrels of resources at a unit cost of 1.2$/bbl.
Also the Italian oil giant, or based by the recent discoveries, gas giant, has managed to slash the average breakeven price of new projects from $45 to $27 a barrel. Eni said it managed to achieve this through a mix of portfolio flexibility, ongoing successful exploration strategy, synergies with existing assets and contract renegotiations.
High prices are anomaly
As everybody knows by now, the oil prices started falling from about $120 a barrel in mid 2014, to below $27 earlier this year.
In Eni’s strategy presentation on Friday Descalzi said that oil prices can be high or low, but one has to run your company and be ready for any price.
He said that the industry had six good years, but reminded that the high oil price was an anomaly, not the low oil price.
“We had a low price for thirty years, and a high price for six years, and now everybody is surprised we have a low oil price…We have to live with the low oil price… We have to be ready to live with the low oil price creating value,” Descalzi said.
Offshore Energy Today Staff