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eni has a signifi cant interest in Africa, which accounts for around 60 percent of its total worldwide production. In other words, anything that affects production in Africa affects the group as a whole, as Claudio Descalzi, Chief Operating Offi cer of eni’s E&P division, will attest. “We’ve been in Africa for 60 years, and this isn’t the fi rst time that we have faced problems,” he says. “It’s not just happening to us, but everybody.”
The problem, in this instance, has been political unrest in two of its primary markets. In 2013 eni cut its production targets, mainly as a result of shrinking volumes from Libya and Nigeria. The group produces 650,000 barrels a day, and between a third and a quarter of that is produced in Libya. Throughout 2013 protestors began blockading oil facilities in the country in a bid to lend weight to their constitutional demands, resulting in a fall in Libya’s oil exports to less than 10 percent of their total. At one stage eni was producing 130,000 barrels a day from Libya, a loss of around 150,000 barrels a day against its potential production target.
“The main issue was not any technical problem but political unrest, particularly onshore,” says Descalzi. “We didn’t experience any security problems – our equipment and people are quite safe – it was a question of our production being shut down.” At the time of speaking, production had recovered to 240,000 barrels a day, but Descalzi estimates that lost production across Nigeria and Libya still amounts to about 8 percent of the group’s total capacity.
Such disruption has almost become a fact of life. eni’s solution is careful diplomacy, and a hefty dose of patience. “We have dialogue and
discussion, and then we start again,” says Descalzi. “I think that will be the outlook for the next couple of years. It’s clear that these countries need these resources, so sooner or later we have to make an agreement to go ahead, it’s just a matter of time.”
Making close connections at every local level is an important element of eni’s success. Descalzi recently met with the Iranian oil minister whom he knows well: “I found him very proactive and very positive about what we have done,” he says. “We’ve developed two very diffi cult fi elds in Iran, one very close to the Iraq border. At the time, we produced signifi cantly more than we had anticipated. We had a target of 30,000 barrels a day and we produced 160,000 barrels, so it was a wonderful project for the Iranians.” But the work to build relationships and trust does not stop with governments. eni is committed to sustainability in the markets in which it operates and in 2012 spent €28 million on local projects in Africa, predominantly in the Sub-Saharan region. Its future plans include electrifi cation projects in Congo and Nigeria and a project to improve Africans’ access to healthcare.
Diversifi cation, within Africa and elsewhere, also helps to spread risk. It is hoped that offshore production in Nigeria will help to compensate for some of the loss in onshore production, and Descalzi points out that eni has signifi cant operations in other regions. “We are in more than 45 countries,” he says. “We are in north Europe, the US, South America, China, Vietnam, Pakistan and Kazakhstan. Diversifi cation is a protection, but I’m quite optimistic about Africa.”
© 2014 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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