A low carbon portfolio and the promotion of natural gas

Eni’s strategy is focused on organic growth and conventional asset development to ensure the break-even of new low carbon projects. In fact, conventional hydrocarbons accounted for 99% of equity production in 2016 of 1,759 kboe/d and nearly the all of the 39 billion barrels of the resource base. Eni has decided not to invest in high-CO₂ content projects such as tar sands, preferring conventional resources and, where possible, near Field Exploration that offers synergies with existing infrastructure.

Together with a focus on simple and modular projects, and in order to maximise flexibility and optimize spending and exposure, Eni has reduced the average break-even price of its projects from $45/b to $30/b of Brent equivalent, among the lowest among its peers. Natural gas will have a key role in the decarbonisation strategy and is the ideal partner for renewable energies.

A combination of natural gas and renewable energy is Eni’s solution for the elimination from electricity generation of coal, which still accounts for 41% of electricity generation and causes almost 73% of emissions in this sector. The portfolio of assets and new investments is subject to regular review by management with a view to identifying potential emerging risks.

Resilience of a low carbon portfolio

Eni’s strategy and portfolio composition minimise the risk of “stranded assets”. In fact, portfolio resilience, even in a decarbonisation scenario, is guaranteed by:

• A focus on the phased development of conventional projects (to limit upfront investment)
• Leadership in low-unit cost exploration and the dual exploration model that facilitates the rapid monetisation of discoveries
• Prudent scenario assumptions that determine a marked selection for investment
• A balanced energy mix based on gas

In addition, Eni also assesses the impact of energy transition scenarios on its portfolio:

• applying a sensitivity metric, at a CO₂ price of $40/tonne in real 2015 terms, on all major projects (even in countries that do not yet have ETS systems) in order to adopt the most appropriate technical solutions to reduce emissions. With this assumption the effect on the average IRR of the portfolio, and a reduction of 0.5%, all projects remain above the minimum rate of return
• performing a stress test on the IEA 450 ppm16 scenario to assess the risk of stranded assets on the upstream portfolio. On the basis of the assumptions of this scenario, there are no negative impacts on Eni’s portfolio