Eni Cites Renegotiations, Few Specifics

Eni said much of the improvement in its Gas & Power earnings in 2017 came from contract renegotiations, but revealed little detail.

CFO Massimo Mondazzi told analysts February 16: "The driver was mostly renegotiation of gas supply [covering] at least three big long-term contracts. Then we had huge efforts on reducing logistics and costs.... We also had quite a significant reserve from LNG trading. Those are also the drivers which we see for the future. In the [Eni] strategy [presentation on March 16] we shall say more about LNG."  He did not identify the three purchase contracts that Eni renegotiated.

Eni has a range of gas offtake contracts, the main one being for piped gas from Russia's Gazprom, plus mainly piped gas from Algerian state-owned Sonatrach. But the Italian firm also buys from Qatargas (LNG), Dutch supplier GasTerra and others. Regarding GasTerra, Eni last year made a provision of €1bn following an arbitration award against it in GasTerra's favour. Eni insisted in July 2017 that the GasTerra arbitration process was not over  and that it had requested a new Dutch gas price review based on different concepts.

The company did not mention GasTerra in its 2017 results February 16 or in a subsequent briefing to analysts. Nor, separately, did it give LNG traded volumes for 2017.

Eni said its Gas & Power segment returned to underlying profit “a year ahead of schedule” - achieving an adjusted net profit of €51mn in 2017 that reversed a 2016 loss of €330mn; for 4Q it was €113mn positive, versus a year-before loss of €31mn.

Asked about declining Italian imports from Libya, Eni CEO Claudio Descalzi said that Libya is "increasing its own gas consumption." But he added that Eni expected to bring more production onstream there in 2018.

It's understood this will include phase 2 of Libya's offshore Bahr Essalam field.