Eni ready to take oil sector to next level
Jan 24, 2010
THERE has been a lot of controversy surrounding the desire by Heritage Oil to sell its stake in an oil concession in western Uganda. Italian firm, Eni, has declared an interest in the concession. <b>Paolo Scaroni</b>, the chief executive officer, gave <b>Paul Busharizi</b> the firm’s position in a
THERE has been a lot of controversy surrounding the desire by Heritage Oil to sell its stake in an oil concession in western Uganda. Italian firm, Eni, has declared an interest in the concession. Paolo Scaroni, the chief executive officer, gave Paul Busharizi the firm’s position in an email interview. Below are the excerpts.
When do you expect to clinch the deal with Heritage Oil? What are the sticking points?
We are honoured by the President’s and the Government’s support and are ready to start working in the country as soon as the deal is formalised.
We have a strong commitment to invest in the development of the oil industry in Uganda and we are looking forward to starting the execution of our plans.
In relation to your other projects around the world, will this be a significant addition to your portfolio if you get the concession?
Uganda has an immense potential in terms of hydrocarbons and it could become one of the most attractive areas for Eni’s future growth.
The Government has been working hard to launch the oil sector and the developement of infrastructure will be key to achieving this successfully.
In this context, Eni has worked in recent months to define a $12-13b integrated development plan that meets the Government expectations.
In addition to the upstream development, the plan includes the refurbishment of the rail system, construction of a refinery, a power plant, an export pipeline to an Indian Ocean port and a comprehensive set of social initiatives.
Moreover, there will be a possibility for Ugandan and international partners to join the realisation of the mid-and-down-stream infrastructures.
Eni already has the largest presence in the African upstream sector of any international energy company.
It is the only company to have developed gas infrastructure in Nigeria and Congo for the benefit of local people. This infrastructure has involved investments of over $3b and provided local energy using hydrocarbons which would otherwise have been exported.
Besides, Eni has successfully applied in a number of African countries a sustainable business model with significant investments in environment, health, access to water, training and education, renewable energy, archeology and historical inheritance. We already have plans to do the same in Angola, Venezuela and Kazakhstan.
In your experience with this kind of project, what are the challenges you expect and what unique challenges do you anticipate in the Uganda project?
A distinctive feature of this integrated project is that we will have an opportunity to significantly contribute to the birth and growth of the oil industry in Uganda.
The major challenge we expect is developing the oil resources of Uganda in a manner which does not harm the environment and the wellbeing of local communities in a pristine region with natural parks and valuable water resources. We have already experienced similar challenges in other sensitive environments and are confident that we can handle them.
Like most new upstream developments, the challenges will be mainly related to the development of the vital infrastructure so far away from the main ports and airports.
It is because Eni’s strong track-record in developing frontier projects with the maximum use of local talent and local content, that we feel confident in making the commitments we have made to the Governemnt.
What time frames (from sign off to exploitation) are you working with in planning this project?
We are ready to deploy our best people, technologies and financial resources to develop the oil resources of the country as soon as the deal is finalised.
We are not sitting idle waiting for the deal to go through. Actually, we have already started laying down operational plans as well as plans to mobilise our resources.
We are only waiting for the deal to be formalised to commence operations fortwith.
However, we will need three years to start the upstream production that will feed the power plant and the refinery.
The electricity output and the refined products will allow Uganda to dramatically reduce its dependence on imported energy. In fact, there will also be an opportunity to export refined products to neighbouring countries.
The pipeline will be a very challenging piece of infrastructure. It will have to cross the mountain range around Lake Albert and go all the way to the sea, more than 1,500km away.
Eni (also through our subsidiary Saipem) has established many world records in building challenging pipeline projects across the alps, deserts and below the Black and Mediterranean seas.
What kind of concessions will you be looking to the Government to provide in making this successful?
We believe that the Government of Uganda has recognised Eni’s unique expertise in developing projects in Africa and we are delighted to become a long-term partner of Uganda, contributing to the development of its oil industry from its infancy.
However, to develop the projects agreed with the Government, we need a stable and conducive legislative and fiscal environment.
There have been concerns about your operations in Kazakstan, can you please give details on this?
Kashagan, which was under the media spotlight in the past couple of years, represents the most challenging undertaking of the oil industry.
In 2008, the consortium concluded negotiations with the government of Kazakhstan that substantially increased the government share in the project governance model.
Eni has retained the responsibility for the first phase of development, which will take the project to first oil. It will ultimately produce more than 400,000 barrels per day.
Eni’s relationship with Kazakh authorities has always been based on mutual respect and trust since our entry in the country almost 20 years ago. Last November, Eni and KazMunayGas signed a cooperation agreement during the state visit of president Nazarbaev to Italy.
This is a wide agreement, which means Eni will play a very important role in the future of the Kazakh oil industry.
The agreement involves not only exploration and production activities in some of the most promising exploration areas in the Caspian Sea, but also the optimisation of gas usage in Kazakhstan.
A number of industrial initiatives, including a gas sweetening plant, a gas turbine power plant, a drydock shipyard and the upgrading of the Pavlodar refinery are also part of the agreement.
This agreement and the fact that we have maintained the responsibility for a vital part of Kazakhstan’s most prominent oil project shows that the Kazakh government considers Eni a valuable long-term partner.
When do you expect to clinch the deal with Heritage Oil? What are the sticking points?
We are honoured by the President’s and the Government’s support and are ready to start working in the country as soon as the deal is formalised.
We have a strong commitment to invest in the development of the oil industry in Uganda and we are looking forward to starting the execution of our plans.
In relation to your other projects around the world, will this be a significant addition to your portfolio if you get the concession?
Uganda has an immense potential in terms of hydrocarbons and it could become one of the most attractive areas for Eni’s future growth.
The Government has been working hard to launch the oil sector and the developement of infrastructure will be key to achieving this successfully.
In this context, Eni has worked in recent months to define a $12-13b integrated development plan that meets the Government expectations.
In addition to the upstream development, the plan includes the refurbishment of the rail system, construction of a refinery, a power plant, an export pipeline to an Indian Ocean port and a comprehensive set of social initiatives.
Moreover, there will be a possibility for Ugandan and international partners to join the realisation of the mid-and-down-stream infrastructures.
Eni already has the largest presence in the African upstream sector of any international energy company.
It is the only company to have developed gas infrastructure in Nigeria and Congo for the benefit of local people. This infrastructure has involved investments of over $3b and provided local energy using hydrocarbons which would otherwise have been exported.
Besides, Eni has successfully applied in a number of African countries a sustainable business model with significant investments in environment, health, access to water, training and education, renewable energy, archeology and historical inheritance. We already have plans to do the same in Angola, Venezuela and Kazakhstan.
In your experience with this kind of project, what are the challenges you expect and what unique challenges do you anticipate in the Uganda project?
A distinctive feature of this integrated project is that we will have an opportunity to significantly contribute to the birth and growth of the oil industry in Uganda.
The major challenge we expect is developing the oil resources of Uganda in a manner which does not harm the environment and the wellbeing of local communities in a pristine region with natural parks and valuable water resources. We have already experienced similar challenges in other sensitive environments and are confident that we can handle them.
Like most new upstream developments, the challenges will be mainly related to the development of the vital infrastructure so far away from the main ports and airports.
It is because Eni’s strong track-record in developing frontier projects with the maximum use of local talent and local content, that we feel confident in making the commitments we have made to the Governemnt.
What time frames (from sign off to exploitation) are you working with in planning this project?
We are ready to deploy our best people, technologies and financial resources to develop the oil resources of the country as soon as the deal is finalised.
We are not sitting idle waiting for the deal to go through. Actually, we have already started laying down operational plans as well as plans to mobilise our resources.
We are only waiting for the deal to be formalised to commence operations fortwith.
However, we will need three years to start the upstream production that will feed the power plant and the refinery.
The electricity output and the refined products will allow Uganda to dramatically reduce its dependence on imported energy. In fact, there will also be an opportunity to export refined products to neighbouring countries.
The pipeline will be a very challenging piece of infrastructure. It will have to cross the mountain range around Lake Albert and go all the way to the sea, more than 1,500km away.
Eni (also through our subsidiary Saipem) has established many world records in building challenging pipeline projects across the alps, deserts and below the Black and Mediterranean seas.
What kind of concessions will you be looking to the Government to provide in making this successful?
We believe that the Government of Uganda has recognised Eni’s unique expertise in developing projects in Africa and we are delighted to become a long-term partner of Uganda, contributing to the development of its oil industry from its infancy.
However, to develop the projects agreed with the Government, we need a stable and conducive legislative and fiscal environment.
There have been concerns about your operations in Kazakstan, can you please give details on this?
Kashagan, which was under the media spotlight in the past couple of years, represents the most challenging undertaking of the oil industry.
In 2008, the consortium concluded negotiations with the government of Kazakhstan that substantially increased the government share in the project governance model.
Eni has retained the responsibility for the first phase of development, which will take the project to first oil. It will ultimately produce more than 400,000 barrels per day.
Eni’s relationship with Kazakh authorities has always been based on mutual respect and trust since our entry in the country almost 20 years ago. Last November, Eni and KazMunayGas signed a cooperation agreement during the state visit of president Nazarbaev to Italy.
This is a wide agreement, which means Eni will play a very important role in the future of the Kazakh oil industry.
The agreement involves not only exploration and production activities in some of the most promising exploration areas in the Caspian Sea, but also the optimisation of gas usage in Kazakhstan.
A number of industrial initiatives, including a gas sweetening plant, a gas turbine power plant, a drydock shipyard and the upgrading of the Pavlodar refinery are also part of the agreement.
This agreement and the fact that we have maintained the responsibility for a vital part of Kazakhstan’s most prominent oil project shows that the Kazakh government considers Eni a valuable long-term partner.