Eni sees long-term capital spending decline in switch to clean energy

London — Italy's Eni expects its capital spending to fall over the coming decades as its focuses on less costly renewable energy projects in a drive to cut its carbon footprint, its chief financial officer Massimo Mondazzi said Friday

Last year, Eni's capital investment totaled Eur7.7 billion ($8.4 billion), nearly all of which was focused on the company's upstream oil and gas division.

Under new long-term targets announced Friday, Eni said it expected its oil and gas production to plateau by 2025 as its switches to renewables energy. (See story 1011 GMT)

"Some business in which we are entering are less capital intensive so it's reasonable to project a lower amount of capex going forward," Mondazzi said in a strategy presentation.

By 2035, Eni expected that half of its capex will be focused on its upstream division together with associated carbon capture projects with the remaining 50% going to finance renewable energy projects, Mondazzi said.

Expected average returns from the new renewables projects, mostly wind and solar, will be in the range of 7%-12%, he said.

Eni, which replaced 117% of production with new oil and reserves last year, said it did not expect to write off any its existing proven reserves as stranded assets in its shift to cleaner energy.

Gas exploration

The company said it expected to produce 85% of its existing 3P reserves by 2035 as a result of its "resilient and flexible" oil and gas assets which have an average $20/b break-even.

Eni's net proven oil and gas reserves stood at 7.27 billion barrels of oil equivalent at the end of 2019, representing a reserve life index of 10.6 years at current production.

The company's new focus on cleaner, renewable energy, however, will not mean the end of upstream exploration in the short term, CEO Claudio Descalzi said at the presentation.

"Exploration will be there. It is our strength," Descalzi said. "Exploration will be more focused on the areas where we can get more gas and to connect more quickly [to the gas market],"

Descalzi said a key part of Eni's future low carbon strategy will be to sell less third party gas and more of its own gas which will have lower costs and carbon footprint.