• Wednesday, May 22, 2024
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Eni eyes oil spin-off in Nigerian assets to reduce debt in energy transition

Eni eyes oil spin-off in Nigerian assets to reduce debt in energy transition

Italian energy giant Eni SPA is planning to spin off the oil and gas assets in Nigeria and the Middle East into a combined business as part of plans to reduce debt and support low-carbon as well as other energy transition activities.

The move is part of a strategy that builds on Eni’s successful spin-off of its Norwegian oil and gas subsidiary (Eni Norge) to create the Vår Energi JV, who is now Norway’s second-largest oil and gas producer, boasting average net production at over 300,000 BOED from 35 oil and gas fields, according to the company’s website.

“The company is working on doing more of the same (as Var) with chosen partners in West Africa and the Near-Far East and Far East,” a source told Reuters without giving further detail.

ENI proposes to create two business units with one focused on oil and gas called “Natural Resources” and the second new unit which will focus mainly on renewable energy called “Energy Evolution.”

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The spinoff will enable the company to partly eliminate debt from its balance sheet, which increased to $32.2 billion in 2020 which is expected to allow Eni to raise the capital necessary to develop renewable and low-carbon projects.

With lower debt, Eni hopes to raise new capital to build its renewables and low-carbon business which will form the backbone of the future company.

Eni, which has been operating in Nigeria since 1962, had an equity hydrocarbon production of 100,000 boe/day in 2018. The company’s operated and non-operated production, development and exploration activities are spread over a total of 30,049km2 in the onshore and offshore areas of the Niger Delta.

Announcing the new structure, Eni’s chief executive Claudio Descalzi said this move reflects the company’s “pivot to the energy transition”.

“An irreversible path that will make us leaders in decarbonized energy products”, he said.

Eni, which currently has a renewable energy capacity of only 350 megawatts, has pledged to reach 15 gigawatts by 2030 and 55 GW by 2050 – mainly by building its own capacity.

“With our new plan, in February, we have set our path for the next 30 years, as of today it is unique in our industry”, he said.

Descalzi noted that the new development will have specific objectives, but they will also cooperate to deliver on the transition and to provide the company’s customers with the widest range of sustainable products.

“The fight against climate change and promotion of sustainable development are recognised by governments, civil society, investors and business alike as priorities for global development”, Descalzi said.

Eni recently engaged in negotiations with fellow oil and gas producers, including British Petroleum plc and France’s Total, regarding the possibility of merging parts of their assets in West Africa and the Middle East. However, the outcome of the negotiations remains uncertain.

Like its peers, Eni has set ambitious targets to slash planet-warming emissions to net-zero by 2050 while rapidly expanding its renewable power generation and biofuel capacity.

The joint ventures model offers companies a way to build a new low-carbon business centred around renewables, power trading and retail, while jettisoning legacy oil and gas businesses which will be wound down over time, a senior source close to Eni said.