Eni’s top risks portfolio consists of 20 risks classified in:
strategic risks
external risks
operational risks
Morevor, the risk related to the spread of pandemics and epidemics, with potential impacts on people, health system and business, is increasing.
The risks described below may have a material effect on our operational and financial performance. We invite our investors to consider these risks carefully.
Strategic risk
Main risk events
Scenario
Climate change
-
Risk of unfavourable fluctuations in Brent and other commodities prices compared to planning assumptions
Treatment
measures
• Efficiency (capex and costs);
• Upstream projects portfolio with a low break
even price and reduced time-to-market;
• Hedging/coverage strategy for gas, power
and LNG exposures aimed at maximizing the
portfolio value;
• Ramp-up of green refineries, diversification
of feedstocks and end markets;
• Chemical portfolio diversification addressed
to specialties and integration with the
downstream supply chain;
• Renewable chemical and recycling.
• Adoption of a new Company's mission based on the UN SDGs and definition of
strategic guidelines and targets for the energy transition in the short, medium and
long term;
• Structured governance on climate with a central role of the Board in managing
main issues connected with climate change; presence of specific committees;
establishment of the Advisory Board and Eni’s programs focused on climate
change issues;
• Inclusion of targets related to the energy transition in management incentive
plan, consistent with the medium and long term plans;
• Leadership on climate-related financial disclosures and participation in different initiatives at international level.
Ref.
Annual Report 2019
pages 88-89
Annual Report 2019
pages 93-95
External risk
Main risk events
Geopolitical
Country
-
Impact of geopolitical issues on strategic actions and business operations.
Political and social instability in Eni’s Countries of operations may lead to acts of internal conflicts, civil unrests, violence, sabotage and attacks, with consequent production
interruptions and losses as well as interruptions in gas supplies via pipe. Global security risk relates to actions or fraudulent events which may negatively affect people andmaterial and immaterial assets. Upstream Credit and Financing risk related to the creditproceeds delay or cost recovery from National Oil Companies (credit) or joint venturepartners (financing).
Treatment
measures
• Institutional activities with national and international players in order to overcome crisis situations;
• Continuous monitoring of the environment, mainly focused on the critical political/institutional developments and regulatory aspects which can potentially affect the business;
• Enhancement of Eni’s presence leveraging on economic and social issues of Countries where Eni operates;
• Participation in the newly established Eastern Mediterranean Gas Forum.
• Geographical diversification of asset portfolio since the exploration phase and business diversification;
• Reduction of the exposure through the Dual Exploration Model;
• Keeping efficient and long-lasting relationships with producing Countries and local stakeholders through local and social development and sustainability projects;
• Implementation of the security management system supported by specific sites and Countries analysis of the preventive measures;
• Finalization of specific agreements on repayment plans of third parties receivables;
• Securitization package with in-kind withdrawals and/or utilization of dedicated escrow account;
• Carry agreement negotiations and offsetting with the NOC’s through debt positions in the Country.
Ref.
Annual Report 2019
pages 88 and 99
Annual Report 2019
pages 99-101
Operational risk
Main risk events
Accidents
-
Blow-out risks and other accidents affecting the upstream assets, refineries and petrochemical plants, as well as the transportation of hydrocarbons and derivatives by sea and land (i.e. fires, explosions, etc.) with damages on people and assets and impact on company profitability and reputation.
Treatment
measures
• Use of the Well Complexity & Economic Index classification methodology to keep the number of "level 1" wells below 30%; real-time monitoring of the drilling phases of complex wells; finalization of the new in house technologies (Downhole Insulation Packer, Casing Valve and well-head safety valve);
• Use of standard methodologies for simplified quantitative assessment (Quantitative Risk Assessment), in order to identify the potential risks connected to the upstream assets (BART - Baseline Assessment Risk Tool) and IT systems for the management of Asset Integrity and Maintenence processes (CCMS - Centralized Computing Center Management System);
• Development of innovative digital tools and big data analytics to improve operational performance and Asset Integrity. In particular, the implementation of the Digital Lighthouse project from Val d'Agri to other upstream and downstream top value assets;
• Specific technological development and emergency management plans; specific HSE audit and plants monitoring;
• Involvement of First Parties to strengthen the culture of security in joint-control JV;
• Management and continuous monitoring of shipping operation through vetting activities on shipping and third operators.
Ref.
Annual Report 2019
pages 92-93
Exposure to long-term gascontracts
Relationship with stakeholder
Adverse scenario on exposure to long-term gas contracts.
Relationships with international, national and local stakeholders on oil&gas industry activities, with impacts also in the media.
• Renegotiations of long-term gas supply contracts;
• Continuous control of arbitration management.
• Integration of targets and sustainability projects (i.e. Community Investment) within the Strategic Plan and management incentive program;
• Focused communication plans, development of dialogue initiatives and discussion with local areas;
• Initiatives to meet and dialogue with stakeholders and strengthening of presence in critical areas in order to intensify the relationship management with local authorities and territories;
• Development of measurement instruments, monitoring and prediction of corporate reputation (RepLab) for all stakeholders categories.
Ref. Annual Report 2019
pages 101
Ref. Annual Report 2019
pages 94
Evolution in legislation (g&p regulatory and hse legislation)
Potential deteriorating legislative/regulatory, national and international environment in the Gas & Power segment with impacts to corporate profitability.
Potential impacts on business operations and competitiveness as result of evolution and complexity of HSE legislation.
Ref. Annual Report 2019
page 102
Cyber security
Investigations and proceedings
Cyber Security & Industrial espionage refers to cyber attacks aimed at compromising information (ICT) and industrial (ICS) systems, as well as the subtraction of Eni's sensitive data.
Environmental, health and safety proceedings may trigger impacts on company profitability (costs for remediation activities and/or plant implementation), operating activities and corporate reputation. Involvement in anti-corruption investigations and proceedings.
• Centralized governance model of Cyber Security, with units dedicated to
cyber intelligence and prevention, monitoring and management of cyber
attacks;
• Strengthening of Cyber Security Operations infrastructures and services;
• Constant updating and alignment of the rules dedicated to the information security management and data protection;
• Operating plans aimed at increasing security of industrial sites (in Italy and abroad), training and awareness initiatives dedicated to Eni's employees;
• Evolution, in the cyber risk detection and assessment phase, of the current governance model according to a business oriented method.
• Enhancement of the process of assigning and managing assignments to external professionals through new methods aimed at ensuring transparency and traceability;
• Continuous monitoring of regulatory developments and constant evaluation of the adequacy of existing presidium and control models;
• Internal training activities at all levels on the topics of interest;
• Monitoring of relations with the Public Administration and definition of routes for the management of relevant problems and for the development of the territory;
• Continuous monitoring of the efficacy and efficiency of reclamation activities;
• Audit activities on compliance with anti-corruption regulations and 231 Legislative Decree.
The outbreak of a contagious disease known as COVID-19 which has spread rapidly to many countries in the world at the beginning of 2020 and is currently ongoing has triggered a sharp sell-off in energy commodities markets due to a sudden drop in worldwide consumption of oil, gas and other energy products as a result of measures taken worldwide to contain the spread of the disease.
We are continuing to evaluate the effects of the recent trends in the oil market. This assessment includes an update to the oil price scenario and management actions to counteract the changed environment, the effects of which are currently not yet determinable and will be accounted for in future reporting periods.
To date, in response to the sharp decrease in commodities prices and the foreseeable constraints arising from the COVID-19 pandemic, management has revised its capital plans and updated the commodities scenario for the years 2020 and 2021.
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