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A new Eni for a new future

Eni's strategy up to 2050.

by Mike Scott
02 March 2020
7 min read
byMike Scott
02 March 2020
7 min read

Eni’s CEO Claudio Descalzi announced on 28th February his long-term strategy for the next three decades, which will allow the company to increase its focus on low carbon energy.
By taking into account the changing energy environment that requires all businesses to become significantly more sustainable in the years to come, Eni confirms its role as a leader in the drive to make energy production more sustainable.

The new Eni will be a much more sustainable company able to thrive in the energy transition, delivering both profitable energy and major carbon footprint reductions.

by Claudio Descalzi, Eni's CEO

Building on the preogress that Eni already made over the past six years, the plan is first and foremost an industrial strategy, which will start with a four-year plan to 2023 and will lead to a dramatic reduction in the carbon footprint of the company and of its products.
Eni’s absolute lifecycle GHG emissions will drop by 80% by 2050. This is particularly significant if we consider that the company will include all the hydrocarbons produced or bought from third parties, in all businesses within its energy portfolio, in accounting for its 3 Scope emissions: Scope 1 covers direct emissions produced by the company, while Scope 2 emissions are those from the generation of purchased electricity, steam, heating and cooling consumed by the company and, finally, Scope 3 includes the indirect emissions from the consumption of Eni’s products by customers.

Four firm principles will drive the development of the company between now and 2050:

  1. The 17 United Nations’ Sustainable Development Goals, which have inspired Eni’s new mission.
  2. More integration among businesses: Eni will become even more integrated from production to final sale in conventional, bio and renewable products.
  3. Financial soundness: the company will continue to focus on capital discipline to maintain a strong balance sheet and sustainable cashflow generation.
  4. Shareholders remuneration: the company will maintain its progressive shareholder remuneration policy.

Now, let’s have a look at how Eni plans to evolve its businesses over the next 30 years.

Upstream

Production in oil and gas will grow by 3.5% until 2025, when it will plateau and start to fall. Most of the reduction will come from oil production, and gas will make up 85% of the company's production by 2050. Eni will continue to focus on conventional projects and on assets that can be brought to market easily, cheaply and quickly. This will increase flexibility and the ability to react to changing market conditions and technological breakthroughs, and decrease the risk of being stuck with stranded assets.

Renewable energy

The company also has big ambitions in renewable energy, looking to become a major global integrated operator, with more than 55GW of renewable capacity by 2050.
About 70% of Eni's renewable capacity will be in OECD countries, where there is strong demand for green electricity from industrial and retail clients, while in non-OECD countries, the power will be mainly sold to state-owned companies. The group plans to focus its growth in northern Mediterranean countries, the US and Australia, where it plans significant expansion in renewable energy and biomethane.

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Midstream

“Midstream will increasingly be the link and optimisation engine between the production and sale of gas, power and zero carbon products”, Descalzi pointed out.

Over time, the midstream division will mainly sell biomethane and renewable power while continuing to manage the group's conventional power and gas capacity, with carbon capture and storage (CCS) projects making its gas carbon-neutral.
Eni, and Italy, have a unique opportunity to build a cost-competitive CCS facility at Ravenna in the North-East, thanks to a combination of a depleted offshore gas field, infrastructure already in place and close proximity to industrial, emissions-producing sites. Eni plans to complete technical studies and the required regulatory procedures by 2025 before building a project that it hopes will serve as a model for future projects worldwide.
It aims to complement this with forest preservation projects that will capture up to 20m tonnes a year of CO2 by 2030 and more than 30m tonnes by 2050.
Its trading will increasingly focus on Eni’s own (equity) products, with a declining share of products bought from third parties.

Refining

The company's refining business will evolve to dramatically scale up its bio refining capacities to 5m tonnes a year by 2050, supplied by second and third-generation feedstocks, phasing out palm oil by 2023. Key markets will be the US, the Middle and Far East, and Europe for biojet fuel. By 2050, Eni’s refining and marketing division will sell only decarbonized products and its service stations will increase the offer of blue, green and bio products. The only traditional refinery that will remain in Eni's portfolio in the long run will be in Ruwais, in the United Arab Emirates, while the company's Italian sites will be progressively converted to produce hydrogen, biomethane, methanol and products from waste.

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Chemicals

In chemicals, the firm's conventional business will focus on specialty products, producing high-performance polymers, but it will also develop circular economy solutions to produce chemicals from renewable energy and advanced recycled plastics.

The company's Versalis unit will increasingly use plastic as a feedstock, employing mechanical and chemical techniques to recycle as much plastic as possible. “By 2050, our chemicals business will be smaller, but much less exposed to market downturns”, Descalzi said.

2020-2023 Plan

This long-term vision is backed up by concrete actions in the short term, as set out in the company's plan for the next four years.
This will see upstream production increase by 3.5% a year to 2025. The 2020-2023 action plan focuses on projects with a high probability of success that can be developed more quickly. These are less likely to get caught up in tighter emissions regulations at a later date.
Renewables capacity will increase to 3GW by 2023 and 5GW by 2025 thanks to investments of €2.6bn to 2023.
Meanwhile, earnings from mid downstream will more than triple by 2023 from 2019 levels, to €2bn. The key areas of focus will be retail gas and power, where the group plans to increase the number of retail customers to 11m, 4m of them in power, while developing new products and services.
In refining, bioprocessing capacity will increase to 1m tonnes by 2023. The firm will also focus on developing circular economy initiatives for producing hydrogen and methanol by recycling waste materials and from castor oil, both new feedstocks for biorefining.
In chemicals, the company will start the shift towards higher value polymers, increase the amount of recycled feedstock and reduce emissions.

“The strategy we announce today represents a fundamental step for Eni”, Descalzi concluded. “The Eni of the future will be even more sustainable”.

The author: Mike Scott

Journalist specializing in environment and business writing for corporate clients, newspapers, magazines and think tanks.