Caspian Technical Conference
Eni’s Just Transition
The Company is committed to a global transformation of its business model
More and more the humanity is thinking of its future. In December 2019, the European Commission announced a priority task – «Green Climate and Energy Strategy» developed for the period till 2030 in order to reach a complete climatic neutrality in Europe by 2050.
The «European Green Deal» road map foresees a major re-construction of the economy to reach a carbon neutrality and zero greenhouse emissions. During the transition period, the legislation will be revised in a comprehensive manner at the level of the EU and member states, thus affecting almost all spheres of economy.
Scientific developments and innovation projects in the area of decarbonization and reduction of the «carbon footprint» in all industries will get a green light and financial support. Thus, the expected total budget for the re-construction of the European economy will exceed 1 tln Euro till 2030.
The coronavirus pandemic and the subsequent deep economic crisis preconditioned the beginning of a structural transformation both of the oil and gas exploration and production and the global economy as a whole. Today, the majority of the EU countries have a common understanding of the fact that, despite the general world economic crisis caused by the pandemic, the European Union’s economy must not revive on the old principles even though it will require significant expenses. «Green Strategy» becomes a more important element of recovery of the European Union during the post-covid time.
Eni started its transformation more than four years ago, and recent events caused by the Covid-19 pandemic have highlighted the need to accelerate along this path to ensure more sustainable development.
The company’s top management reaction towards the pandemic and the world economic situation that changed this spring, was prompt and competent: an in-depth and comprehensive analysis was done within a very short period, and an initial action plan to reduce costs was shared, taking into account a lower sceanio that now sees 40 dollars per barrel of Brent in the current year to 60 dollars per barrel in 2023. Based on this scenario, the company’s goal was to reduce capital expenditures and optimize expenses.
In general, in 2020-2021, the company aims to reduce capital expenditures, on average, by more than 30%, and an overall cost optimization by 2.8 bln Euro, of which 25-30% are structural. As an aggregate, it represents a reduction by almost 8 bln Euro compared to the initial plan.
Expecting the average annual price for Brent to be 40 dollars per barrel in 2020, the company maintains capital investments at the level slightly more than 5bln Euro. In line with the growing expectations regarding Brent, capital expenses will gradually increase from the year 2021 and will reach approximately 8bln in 2022, this is consistent with the initial plan before the Covid.
At the same time the «green capital investments» will be equal to 17% of the total amount (versus 12% in the initial plan), reaching 26% in 2023 (versus 20% in the initial plan). The weight of «green investments» will become more and more significant as the company moves towards the re-balancing of its portfolio.
In February, Eni shared a strategic «road map» developed for the period until 2050, the map will lead the company through the evolution of the business model. In accordance with the strategy, a new Company’s structure that includes two new integrated business groups was announced in June.
One of them is the Natural Resources group that will steadily develop the oil and gas portfolio while promoting energy efficiency and carbon capture. This business group will be integrated into a gas value chain, from exploration to development and wholesale via pipeline or in the form of LNG using technical and commercial capacities of the Company. Moreover, this business will be in charge of new technological projects that will allow absorbing carbon dioxide emitted during flaring or by industrial enterprises from the air and use it for the production of new goods or inject it and store underground. Such technologies are called CCUS (Carbon Capture, Utilization and Storage). Also, this group will implement forestry and environment restoration projects and stable supply of de-carbonized products.
The second business group, Energy Evolution, will focus on supporting the Company’s energy development, product transformation and marketing from fossil fuel to the bio, «blue» and «green» one, and on increasing electricity production from renewable energy sources and bio-methane.
The division will coordinate oil refining and chemical business of the company, it will also continue the development of the Eni’s retail portfolio by supplying more and more de-carbonized products for the mobility, household consumption and small businesses.
This business group will also include Versalis that produces chemical goods, and Eni gas e luce that offers marketing services for households and enterprises.
In addition, with regard to the central structures, Eni will set up a new division – Technologies, Research and Advanced Development and Digital Technologies to stimulate process innovations and develop new technologies.
Through the coordination of the business group, the Company will be able to comprehensively develop these activities both geographically and in terms of business areas, achieving maximum results in product development, customer service and profitability.
The re-organization also affects the corporate structures that will continue their development being the central reference point for the strategic and control processes.
This transformation will give Eni a more balanced portfolio, reducing exposure to volatility in hydrocarbon prices, while at the same time becoming a leader in the de-carbonization area.
Presenting the new structure, Chief Executive Officer of Eni Claudio Descalzi emphasized that this step has reflected «the company’s drive towards the energy industry.» «This is an irreversible path that will make us the leaders in the area of de-carbonized energy products», – mentioned Mr. Descalzi – «With our new plan, we have defined our way forward for the next 30 years, nowadays it is a unique plan in the industry.»
Mr. Descalzi noted that each of these two divisions would have a target of its own but they will cooperate to ensure the «green transition» and provide its customers the widest range of environmentally clean products.
«Combat against climate change and support of the sustainable development are recognized by the governments, civil society, investors and business as the priorities of the global development, and are priorities also for us.» – Descalzi noted.
«Only those who achieves these goals in an innovative way will create value in the long run. We want to be the principle participants of a fair energy transition, which we believe to and which plays the key role in the Eni’s transformation,» – he emphasized.
Eni has already started implementing the new organization