Eni Presents The 15th Edition Of The World Oil And Gas Review

Eni Inks Cooperation Deal With China's CNPC

Eni presents the 15th edition of the World Oil and Gas Review, the annual statistics report on world reserves, production and consumption of oil and gas. A special focus is on crude oil quality and on the refinery sector.

Year 2015 proved a slight increase in oil reserves against a decline in gas reserves.

Oil production set another yearly record growth (+2.9%) driven by the Middle East and North America. Among the top ten producers, Iraq showed the biggest rise and the USA, the largest producer, kept on growing for the seventh year in a row. Geopolitics still affect the production of Libya, Syria and Yemen.

In the crude quality analysis emerged a significant increase of the “heavy sour” category (+12%) due to the new Iraq stream of Basrah heavy that has been commercialized since June 2015, together with “ultra light” crudes (+6%), directly related to shale oil condensate production, and “heavy sweet” crudes (+8%).

World oil demand  grew by 1.8 Mb/d (+2.0%), one of the biggest increases in the recent years stimulated to a large extent by the rapid fall in oil prices that began in the second half of 2014 gaining momentum in 2015. The OECD countries have interrupted their structural decline trend (+0.4 Mb/d; +1.0%) while non-OECD countries’ growth slowed down (+1.4 Mb/d; +3.0%) mainly due to the main oil producing countries consumption reduction (Latin America and Russia).

In the last five years world refining capacity has grown by over 4 Mb/d where Asia, in particular China, has been the main contributor followed by North America and Middle East. The fall in the domestic demand together with the increasing foreign competition have pushed Europe to curb refining capacity.

In 2015, world gas production increased by 1.6%, driven by USA and Iran (+5% each). In Europe, Norway had a strong production increase (+8%), whereas European Union output continued to decline (-8.5%). In Russia, which is the world’s second gas producer, after the previous year’s decline, output grew by 1.3%.

Gas demand started to rise again in 2015 (+1.7% against -0.2% in 2014) with a strong increase in some emerging markets (MENA +4.8%) but also in mature areas like North America (+2.2%) and Europe (2.2%). Asia stopped its continuous growth as a consequence of a slowdown in China (+3.1% vs +9.4% in 2015) and a strong decline in Japan and South Korea (-6.0% and -8.8% respectively), due to the restart of nuclear plants and an increasing role for coal and renewables in power.

Eni’s activities in Kazakhstan

In June 2015, Eni and KazMunayGas (KMG) signed an agreement on the transfer to Eni of the 50% stake for exploration and production activities in the Isatay block located in the Kazakh sector of the Caspian Sea. The transfer is expected to be finalized after all necessary approvals required by law. The Isatay block is estimated to have significant potential oil resources and will be operated by a joint operating company established by KMG and Eni on a 50/50 basis. In addition, after the finalization of the FEED, the activities related to the contracts’ award for the construction of a shipyard in Kuryk started, as provided by the agreements signed in 2014.

Kashagan

Eni holds a 16.81% working interest in the North Caspian Sea Production Sharing Agreement (NCSPSA). The NCSPSA defines terms and conditions for the exploration and development of the giant Kashagan field, which was discovered in the Northern section of the contractual area in the year 2000 over an undeveloped area extending for 4,600 square kilometers. The NCSPSA expires at the end of 2041.

On June 13, 2015, the Consortium completed a new setup of the operating model to execute the development of the project, targeting to streamline decision-making process, to increase efficiency in operations and to reduce costs. This new operating model provides that the company NCOC NV, participated by the seven partners of the Consortium, acts as the sole operator of all exploration, development and production activities at the Kashagan field.
In December 2015, the Authority of the Republic of Kazakhstan approved the Amendment 5 to the development plan and budget for the Phase 1 of the Kashagan project (the so-called “Experimental Program”) which defines the update to the project schedule and budget and the activities for the replacement of the damaged pipelines which forced the Consortium to shut down the production at the Kashagan field soon after the start-up in September 2013.
During the year, the activities progressed to replace the damaged pipelines and the Consortium expects to complete the installation works in the second half of 2016 with production re-start by the end of 2016. The production capacity of 370 kbbl/d planned for the Phase 1 is expected to be achieved during 2017.
Within the agreements with local Authorities, Eni has been conducting training program for Kazakh resources in the oil&gas sector, in addition to the realization of infrastructures with social purpose.

Karachaganak

Located onshore in West Kazakhstan, Karachaganak (Eni’s interest 29.25%) is a liquid, gas and condensate giant field. Operations are conducted by the Karachaganak Petroleum Operating Consortium (KPO) and are regulated by a PSA lasting 40 years, until 2037. Eni and British Gas are co-operators of the venture.
In June 2015, the Gas Sales Agreement for the Karachaganak field (Eni 29.25%) was extended until 2038. The agreement provides the supply of currently produced gas volumes to the Orenburg treatment plant, including additional new development projects to support the current liquids and gas production.

Production

In 2015, production of the Karachaganak field averaged 239 KBBL/d of liquids (56 net to Eni) and 924 mmCF/d of natural gas (218 net to Eni). This field is developed by producing liquids from the deeper layers of the reservoir. The gas is marketed (about 48%) at the Russian gas plant in Orenburg and the remaining volumes is utilized for re-injecting in the higher layers and the production of fuel gas. Approximately 93% of liquid production are stabilized at the Karachaganak Processing Complex (KPC) with a capacity of approximately 250 KBBL/d and exported to Western markets through the Caspian Pipeline Consortium (Eni’s interest 2%) and the Atyrau-Samara pipeline. The remaining volumes of non-stabilized liquid production (approximately 16 KBBL/d) are marketed at the Russian terminal in Orenburg.

Development

The Karachaganak Expansion Project is currently under study. The project targets to install, in stages, the gas treatment plants and re-injection facilities to support liquids’ production profile. The development plan is currently in the phase of technical and marketing definition of its first development phase, aimed to increase the capacity of gas re-injection. Eni continues its commitment to support local communities in the nearby area of Karachaganak field. In particular, activities focused on: (i) the professional training; and (ii) the construction of kindergartens, maintainance of hospitals and roads, building of heating plants and sport centres.

Moreover, following the re-definition of the Sanitary Protection Zone (SPZ) associated to the ongoing development projects, in 2015, according to the international standards and best practices, a project of relocation of the inhabitants from Berezovka and Bestau villages started.
Eni continues to conduct monitoring activities on biodiversity and ecosystems in the nearby of the production areas.

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