Opinion

Eni sets course on ‘irreversible path’

Move gives both of Eni’s businesses a chance to highlight their worth at a critical period of climate breakdown, low oil prices and coronavirus pandemic

Source: Upstream, By Editorial

OPINION: Eni’s decision to divide its business into two — effectively one for oil and one for renewables — has symbolic and operational importance.

This is no cosmetic change and is part of what the Italian group calls its “irreversible path” towards becoming a leader in decarbonised energy.

Chief financial officer Massimo Mondazzi has agreed to head up the new “green” arm, so this is definitely not for show.

Both the Natural Resources and Energy Evolution divisions will be tasked with reducing Eni’s carbon footprint.

One could envisage a time in the future when the two divisions could potentially either be floated as separate companies or the oil arm sold off as Eni exits from fossil fuels in the way of Denmark’s Dong Energy, now called Orsted.

A recent report by the International Energy Agency and Imperial College in London showed renewable energy shares outperforming fossil fuel shares over the past 10 years.

Eni’s move gives both of its businesses a chance to highlight their worth at a critical period of climate breakdown, low oil prices and the Covid-19 pandemic.

There are conflicting views on whether the massive drop in oil and gas demand due to the pandemic has hastened a structural change in the energy sector.

Certainly, BP’s decision this week to cut 10,000 jobs came alongside a promise to emerge as a “leaner, faster moving and lower carbon company.”

Eni’s move could reflect this, too, while highlighting the growing schism between Europe and the US.

Policymakers in Brussels are promising a speedy post-Covid-19 response to meet the Paris climate accord.

US officials remain split on the energy transition, with President Donald Trump happy to pull the country out of the Paris agreement but also to promote domestic fossil fuels.

US oil majors see business largely continuing as usual even as some shareholders clamour for change.

ExxonMobil chief executive Darren Woods told investors on a 1 May analyst call: “I know there are a lot of different views on what the future holds, but I want to be clear on how we see it: the long-term fundamentals that drive our business have not changed.”

Chevron counterpart Mike Wirth, on a similar call that same day, said: “The world is not ready to transition to another source of energy in large part anytime soon.”

Yet Eni is only one of the large European oil and gas companies pressing ahead fast with low-carbon initiatives.

Shell, BP, Equinor and others are all taking steps. France’s Total has just unveiled plans to buy a 51% stake in Seagreen 1, a huge Scottish offshore wind farm development.

Total is aiming to reach net-zero emissions for itself and its customers by 2030 at the latest.

It is also involved with Shell and Equinor in the massive Northern Lights carbon, capture and storage project off Norway.

Renewable energy spending is largely being retained at previous levels by European oil majors, while oil and gas spending is being cut due to the Covid-19 fallout on the market.

But overall expenditure on wind and solar projects remains low when compared to fossil fuels and is set to fall over the next three years, according to Norwegian consultancy Rystad Energy.

It is a mixed picture, but Eni is certainly making its mark.

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