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Eni targets LNG portfolio expansion

The Italian oil and gas firm is aiming to grow despite a challenging market

Eni is looking to further expand its global LNG portfolio and is looking optimistically at the opportunities presented by the sector—despite concerns about a supply glut as new projects continue to arrive and ramp up to plateau output.

Development of Eni’s LNG portfolio is progressing at a faster speed than previously forecast, Franco Magnani, Eni’s executive vice president, gas business unit, told Petroleum Economist on the sidelines of the European Annual Gas Conference (EAGC) in Paris.

“We are in a context of strong demand but also of many LNG [export] projects coming on stream,” says Magnani. While this poses challenges, “this is not a new situation for the sector”. “LNG has always been cyclical, and while supply develops in blocks, demand growth is gradual” he says.

Nonetheless, Eni’s portfolio is “resilient” as “in the last years, we have been working to make it competitive by lowering cost and focusing on efficient projects that have a low break-even”. This means “we can face the situation”, says Magnani. “The gas industry [is] embracing the environmental challenge and preparing to tackle it, [and] one of the levers is to have an efficient portfolio that offers as many options as possible.”

“We have a strong pipeline portfolio in Europe but also a strong [traded] market presence” meaning extra LNG supplies can be accommodated in Eni’s portfolio, the executive says.

“LNG has always been cyclical, and while supply develops in blocks, demand growth is gradual”

Asked about the near-term outlook for LNG in Europe, and prospects of LNG oversupply tapering off, leading to a refocus on pipeline gas imports, Magnani feels that “we tend to see pipeline gas as baseload”. “LNG has, in many ways, the same role as renewables, covering part of the demand when the price is high, and will increasingly be driven by the market… We expect the bulk of demand in Europe to continue to be covered by pipeline gas”, he says.

While the potential for batteries combined with renewables to supply baseload power in the future—possibly challenging gas-fired generation's role—is a promising technology, in Magnani’s view further development and cost reduction are needed for this to really become economically viable on a large scale. “If batteries were developed at accessible costs, the market change would be important” he says, but, until then, “gas continues to offer a cleaner solution for power generation”.

Magnani stresses that—while Europe is focusing on stringent objectives which might pose future challenges for gas— the fuel can have a key role in other geographies. Communities in, for example, Africa are still faced with lack of access to any energy, he says, reinforcing previous Eni strategy statements that Africa’s growing energy demand would be a focus.

But, asked whether this means Eni will shift its attention away from Europe towards other areas, Magnani tells Petroleum Economist that, while the world seems to have “two conflicting objectives, reducing emissions and [meeting growing energy demand", Eni has a “unified strategy”. “Our presence in Europe is strong and we’re committed to staying”, while at the same time developing international projects, he says.

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