Eni’s midstream gas & power officer, Umberto Vergine, acknowledges that in the past five years, international LNG prices rose to record highs before collapsing, dragged down first by regional markets alignment and after by the turmoil affecting energy markets, however he sees a strong stream of new LNG projects will provide abundant supply, supporting further market liquidity and growth of LNG demand worldwide.
Vergine, who will be in Perth in April to give a keynote address at LNG 18, says European LNG demand will rise significantly, driven by shrinking domestic gas production and ambitious emissions policies, aimed at progressively implementing COP21.
“Combined with ample regasification capacity and the European Union willingness to diversify supply sources, this will foster Europe’s pivotal role as balancing the market for global LNG,” he said.
“The way the LNG market will work tomorrow is shaped today. Traditional buyers as well as new entrants have a unique opportunity to get their evolving needs fully satisfied, through flexible and innovative commercial terms.
“Among producers, the winners of tomorrow shall combine the quality and size of their upstream assets, providing price competitiveness with outstanding ability to adapt to the evolving buyers’ demands.”
Eni has two significant developments it believes can meet European demand, its various LNG interests in Mozambique, primarily Area 4, and the recent Zohr discovery, offshore Egypt.
Recently, Eni announced that it, together with the Egyptian authorities, has completed the approval process for the development of Zohr field, where it recently completed drilling of the first appraisal well, Zohr-2X, in the Shorouk block.
The well, drilled 1.5km from the Zohr-1X well, found 300m of net gas pay.
Eni plans to drill three more wells to appraise the field, which is believed to host 30 trillion cubic feet.
The company has drilled more than a dozen wells in Area 4, including the Agulha discovery, to define around 85Ycg of gas in the Rovuma Basin, for which it is considering a floating LNG project, although exports are expected to be primarily targeted at Asia.
First gas had been tipped as early as 2017, although that has probably slipped into the early 2020s.
Eni has also harmonized some of the fields with its Area 1 neighbours, led by Anadarko, to develop and operate jointly a large onshore LNG plant that could eventually become a 10 train, 50 million tonne per annum development.
Phase one is expected to cost around $25 billion and require two 5MMtpa trains.
Eni has cut its cut capital spending by 20% in 2016, after a 17% reduction in 2015.
The company revised its view of prices for 2016-19 to $65 a barrel, from its previous forecast of $90 a barrel. That lower figure, however, is still substantially above the current price of about $35 a barrel for Brent crude, an international benchmark.
Vergine will talk about the role of Mozambique Area 4 and Zohr at LNG 18, its flagships, how they are positioned in the global gas and LNG market and how they have the favourable characteristics to meet market requirements
Joining him at the global event will be Shell CEO Ben van Beurden, Chevron chairman John Watson and Woodside CEO Peter Coleman.
The triennial conference, which is expected to attract LNG industry professionals from more than 70 countries, will run between April 9 and 15.
