Eni's Sonatrach Price 'Aligned to Italian Hub': Descalzi
Eni CEO Claudio Descalzi has told an analysts conference in New York that its long-term gas contract with Algerian state-owned Sonatrach has been “aligned to our Italian hub,” believed to mean Italy’s PSV price.
This is understood to be the first time in 33 years that Eni’s Algerian gas import contract has been fully delinked from oil pricing. The new pricing is valid from October 1 2016.
“This morning we announced a very important result because we finalised a renegotiation of the Sonatrach contract, aligning that contract to our Italian hub," Descalzi told his New York audience on December 13.
“That is a very important result that will enable us to get a breakeven on our Gas&Power business, as we promised in 2017,” added Descalzi. He later clarified that the Sonatrach renegotiation would be among three key factors, including changes to a Statoil gas contract and storage costs, that together would contribute to achieve breakeven on Eni's G&P business next year.
Eni CEO Claudio Descalzi (Photo credit: Eni)
The company later on December 13 issued an opaque press statement, saying that it had reached agreement with Algerian state-run Sonatrach relating to gas supplies for the gas year 2016/2017, which began on October 1, and noting that “commercial terms [were] in accordance with the relevant gas market” but including none of Descalzi’s clear remarks. It noted though that changes were in accordance with a framework agreement signed by Eni and Sonatrach on November 25.
Originally Eni’s long-term contract from Sonatrach was for some 20bn m3/yr, which it almost offtook in 2012. But since then Eni and other Italian importers of Algerian gas have scaled back their imports, with Sonatrach’s consent, though more recently this year their volumes have trended upward, if not back to 2012 levels.
NGW asked Eni and Sonatrach what volumes they would trade in the gas year starting October 1 2016 but has yet to hear from either. Some of Eni's press team were travelling back from the New York event on December 14.
In its November 25 release, Eni said it imported some 9.7bn m3 from Algeria, or about 16% of whole Italian gas demand. Not all of Eni’s long term contracts however are to supply the Italian market though. Some also go, for example, to other European markets such as Spain or Belgium.
Mark Smedley