Italian oil major Eni announced Friday plans for a clean energy “evolution” for its business to 2050, which will see its oil and gas production plateau in five years as it spends more on renewable power and biofuels.
Under the plans, Eni said its upstream production growth will average 3.5% a year up to 2025, with subsequent “flexible decline” mainly for oil afterward. Gas production will make up about 60% of total production by 2030 and rise to 85% in 2050, Eni said.
Reporting fourth quarter and full year 2019 earnings Friday, Eni said its oil and gas production averaged 1.87 million b/d of oil equivalent last year, up 5% on the year. In the fourth quarter of 2019, oil and natural gas production averaged 1.92 million boe/d.
“The strategy we announce today represents a fundamental step for Eni,” CEO Claudio Descalzi said in a statement. “The result will be a portfolio that is more balanced and integrated and will be stronger for its adaptability and competitive shareholder remuneration.”
Eni’s long term strategy builds on an existing goal to reach net-zero emissions from its own exploration and production operations by 2030. By 2050 Eni said it now plans an 80% reduction in net Scope 3 carbon emissions of its energy products sold and a 55% reduction in emissions intensity compared to 2018.
Eni ambitious long-term strategy comes on the heels of BP’s plan to become a “net-zero” carbon emitter across its business by 2050 as pressure mounts on oil companies to shift to cleaner energy and offset their emissions. Rival Shell plans to cut emissions from its products by 50% by 2050 and Total and Repsol also have net carbon reduction targets.
Key to Eni’s net emission cuts will be the progressive expansion of Eni’s installed global renewables power capacity to 3 GW by 2023 and more than 55 GW by 2050, mainly in OECD countries, it said. With investments of Eur2.6 billion over the period, the renewable power push will include gas-fired plants with CO2 capture and storage projects.
Downstream, Eni said it plans a major expansion of its biorefining capacity to over 5 million mt/year with the conversion of its existing Italian refining sites through new plants for the production of hydrogen, methanol and biomethane from waste materials.
“In the long-term, the Ruwais refinery in the United Arab Emirates will be the only traditional refinery in operation,” Eni said.
Eni said it plans to grow its retail power and gas activities to a customer base of over 20 million by 2050, with a complete transition to biofuels and renewable products by 2050.
Lower cash breakeven
In the medium term, Eni said it plans to grow its LNG portfolio through the development of new markets and integration with upstream. Contracted LNG volumes are expected to reach 16 million mt/year by 2025.
Eni said its four-year investment plan on “high-value, short-payback” projects provides for investments of around Eur32 billion by 2023. The investment target, however, includes a “high level of flexibility,” Eni said, with around 60% of investments not yet committed in 2022-23.
Assuming a Brent oil price at $60/b, Eni expects its operating cash flow will grow by more than Eur3 billion by 2030 compared to 2019. Part of the boost will come from a $10/b reduction in Eni’s breakeven oil price for cash neutrality to $45/b in 2023, it said.
For the fourth quarter of 2019, Eni reported a 62% slide in adjusted net earnings of Eur546 million, missing a Eur680 million market consensus figure for the period on sharply weaker refining and chemical results.