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Italy's Eni targets average 3.5%/year oil, gas volume growth to 2025

London — Italy's Eni expects to grow its oil and gas production by an average of 3.5% a year over the next four years, the company said Friday, as it ramps up output from new projects and develops resources from its recent drilling success.

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The energy company said it expects to take final investment decisions to develop some 3 billion barrels of oil equivalent of reserves up to 2025, as it pivots towards natural gas.

Over the 2019-22 period, 18 major startups will contribute about 660,000 boe/d, Eni said, with the expansion of existing fields adding a further 290,000 boe/d.

The growth will take Eni's upstream production to over 2.1 million boe/d in 2022, rising to 2.4 million boe/d in 2025, compared with 1.85 million boe/d in 2018.

The company said it plans to spend about Eur3.5 billion ($3.96 billion) over 2019-22, targeting 2.5 billion barrels of new resources at a unit cost of below $2/b and drilling around 40 wells each year in its exploration acreage.

"We will continue to grow organically in upstream thanks to a large amount of new acreage in high potential basins," CEO Claudio Descalzi said "We will continue to keep a strong discipline on investment and we expect our new development projects to have a breakeven at $25/boe."

Announcing a new share buyback program and a bigger dividend, Eni said the targets will allow it to generate some Eur22 billion of cumulative free cash flow in its upstream business to 2022, almost double that needed to pay its share dividend.

MIDDLE EAST PUSH

Eni has enjoyed a few years of successful exploration, finding major gas fields in waters off Mozambique and in the East Mediterranean with its 30 Tcf Zohr gas field offshore Egypt and a more recent large gas find off Cyprus. The company also found over 1 billion barrels of oil off Mexico in 2017.

Major projects set to come on stream in the coming four years include Mexico's Area 1, the Coral FLNG project off Mozambique, and the Merakes gas tieback off Kalimantan in Indonesia. Eni will also see a large output lift from its remaining 50% stake in Egypt's Zohr gas field.

Descalzi said Eni is looking to further expand its upstream footprint in the Middle East, East Africa and Asia in the coming years following a string of deals designed to diversify its asset base and rebalance its refining portfolio.

Following recent upstream deals with Abu Dhabi National Oil Company for a stake in the UAE's giant Ghasha gas sour concession and license blocks in Oman, Bahrain and the Sharjah Emirate, Eni has a longer-term goal of growing low-cost equity production from the Persian Gulf region to 400,000 boe/d.

LNG GROWTH

Eni said it expects LNG to play a "crucial role" in its future growth, underpinned by its new wave of major gas field projects.

The company plans to accelerate the development of its LNG portfolio, it said, targeting 14 million mt/year of contracted volumes by 2022.

With the large Mozambique LNG project expected on stream in 2022, LNG volumes will rise to 16 million mt/year by 2025, 2 million mt/year higher than its previous target and almost double the 8.8 million mt/year achieved in 2018, Eni said.

With natural gas playing a greater role in Eni's upstream portfolio, Descalzi said up to 60% of its production will be gas by 2030.

Like many of its oil major peers, Eni is spending more on renewables and low carbon energy. The company said it plans to complete 60 renewable power projects for a total in excess of 1.6 GW capacity by 2022, investing Eur1.4 billion, and up to 5 GW by 2025.

Downstream, Eni said it continues to target lower breakeven refining margins following last year's acquisition of a 20% stake in the Ruwais refining complex in the UAE. As a result of the deal, Eni will see its refining capacity grow by 40% by the end of 2023, while its average refining breakeven will fall to $1.50/b from 2023, down from $2.70/b in 2020.

Eni expects its green refining capacity will grow to 1 million mt/year through the start-up of Gela and the second phase of Venice biofuel plants.

-- Robert Perkins, robert.perkins@spglobal.com

-- Edited by James Leech, newsdesk@spglobal.com