Mark Thomas, Editor-in-Chief, E&P
(From London) – Italian major Eni has taken an unconventional approach to the ongoing ‘lower for longer’ industry downturn – achieving outstanding results by focusing on conventional oil and gas.
While many upstream companies have pulled back from conventional offshore exploration and development activity due to traditionally longer project cycles in order to focus on shorter-cycle, faster return unconventional projects, Eni has followed a strategy of sticking to what it knows best, according to its chief exploration officer, Luca Bertelli.
Speaking in the opening keynote session on the first day of the exploration-focused PETEX exhibition and conference in London organised by the PESGB (Petroleum Exploration Society of Great Britain), Bertelli told a packed auditorium that Eni took the strategic decision “to stay conventional. We did not want to follow the pack, but stay with what we know. We see many opportunities remaining.”
With the company following a balanced approach and avoiding overexposure to any single play such as deep or ultra-deepwater, Eni’s exploration results have been the envy of its peers. It has also focused in recent years in particular in quickly monetizing those resources, compressing the time it takes to get them from discovery to production.
“This strategy has worked out quite impressively,” he said, “and today in our portfolio we have a very rich basket of valuable projects deriving from successful exploration. The large majority of these projects will come onstream in 2017 and 2018, or we will take the Final Investment Decisions for them in the same years. Eni has never experienced such a rich portfolio of projects deriving from exploration as this.”
Bertelli stressed that it operates nearly all these projects, following what he described as a “renaissance” in how it began to approach exploration between 2008 and 2010. The company, he said, completely changed its exploration model and went “from being a follower to being a main actor”, expanding from its traditional centres of focus in previous decades in Italy and North Africa to a largely-operated global portfolio.
“In the last 10 years Eni is leading its peers for discovered volumes in exploration efficiency. This is also reflected in our unit exploration cost, which for us is below $1/bbl over the last 10 years – much lower than our competitors.”
But the other key difference, he continued, was that it has done this while staying fully focused on conventionals. “The distinctive element in this is that all our recent discoveries have been derived from conventional exploration, and that every three years we have discovered either a giant or a supergiant field. We have discovered over these last 10 years already 2.5 times the volume of our yearly production – all coming from conventional discoveries.”
In the period from 2006 to 2015 Eni discovered about 14 Bboe of resources from new exploration activity, with “plenty more expected in the period from 2016 to 2019”, he said. “That’s also 2.5 times our expected production over the same period.”
Bertelli also went on to outline Eni’s revised model since the downturn bit hardest of generating cash from the early monetization of its exploration successes. Since the end of 2014 it has been prioritizing and developing the best prospects, while slowing down its overall exploration investment. “Our efforts in these difficult years has been focused on incremental and nearfield exploration, utilizing already-existing infrastructure and on capturing the upside of neglected reservoirs,” he said.
The company has also cut back on the number of deepwater and ultradeepwater wells it drills, with the aim of “drilling fewer but better wells”. This saw it shrink activity from drilling approximately 15 deepwater wells since 2014 to four or five in each of 2015 and 2016.
It’s managed to stay successful with this approach, best represented by its giant Zohr discovery made in deepwater offshore Egypt in August 2015, and also the smaller but now already-producing Nooros discovery, discovered a month earlier in the shallow-water Nile Delta.
Right place, right time
Eni operates the 30 Tcf gas-in-place Zohr field with a 100% stake, with the discovery opening up an entirely new play. Sanctioned in the first quarter of 2016, it is due onstream before the end of 2017 with six wells already drilled. “Zohr has fantastic petrophysics,” said Bertelli. “It was the right place at the right time to discover a giant gas field in Egypt.”
Eni had discovered Nooros, a near-field find, the month before Zohr. Impressively it was producing by September 2015, and with 2 Tcf of gas in place, a total of three further exploration wells and four production wells have been drilled, with all now producing.
Nooros reached a production level of 750 MMcf/d (120,000 boe/d) in Sept 2016, just 13 months after discovery. Production is expected to reach 160,000 boe/d by Q1 2017.
“Nooros is today the largest gas field producing in Egypt, and its production has converted the decline of gas production in Egypt. These two projects completely changed the energy landscape of the country,” said Bertelli.
Eni currently has almost 300,000 sq km of net exploration acreage globally in 43 countries, but the exploration chief also urged governments to continue to make their acreage more attractive. “Investments will be clearly redirected into countries that will incentivise exploration,” he added.