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FOCUS-Eni keeps foot on the gas in high-speed Gulf drive

Fri, 01st Feb 2019 07:00

* Eni has struck series of Gulf deals in strategy shift

* Seeks to reduce reliance on Africa, open doors to Asia

* Italian energy major's buying spree not over - sources

* Targeting oil and gas fields in UAE, Qatar assets -sources

By Stephen Jewkes

MILAN, Feb 1 (Reuters) - In less than 12 months EniCEO Claudio Descalzi has turned the Middle East from a sideshowto a strategic hub for the Italian energy major. And the shiftis not over.

Since last March the 63-year-old has clinched nine deals inthe United Arab Emirates, gained a toehold in Bahrain andexpanded in Oman to reshape the group's future.

In the latest deal on Sunday, Eni pledged $3.3 billion tobuy part of the world's fourth-biggest refinery in the UAE,increasing its own refining capacity overnight by more than athird.

But the buying spree is not over and the company is lookingto further bolster its presence in the Gulf region, according tothree banking and industry sources with knowledge of the matter.

They said Eni was now primarily targeting "upstream"exploration assets - oil and gas fields - rather than downstreamoperations.

The company is looking to buy more assets in the UAE, aswell as entering Qatar, the sources said, without giving furtherdetails.

"Descalzi was in the UAE 20-odd times last year topersonally build relationships to secure the deals," said aseparate industry source. "And there's more on the way."

Eni declined to comment.

The Gulf drive is part of Descalzi's plans to cut Eni'straditional reliance on Africa, which accounts for more thanhalf its production, while gaining more exposure to refiningassets in an oil-rich region closer to Asian markets.

In recent years, weakness in the company's downstreambusinesses like refining and chemicals have dragged on profitsand placed more of a premium on securing success in exploration.

Its heavy presence in Africa, with the risk associated withworking in places like Libya and Nigeria, has also weighed onshare price performance.

A banking source with knowledge of the matter said Eni wastargeting the Gulf area of the Middle East because it did nothave the political and security risks of countries like Iraq.

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The Gulf region has in recent years attracted the world'stop oil companies seeking stakes in big and easy-to-develop oiland gas fields at a time of uncertainty over oil prices.

Long-term contracts in the region also guarantee stablerevenues even if the returns are lower than other, riskierfields.

But while majors like BP, Total, Shelland Exxon have had a strong presence in theGulf for decades, Eni has not.

The Italian firm's strategy of selling down assets like itsprize Zohr gas field in Egypt has been key to its recentexpansion in the region.

Last March Eni traded a stake in Zohr with Emirates fundMubadala to get its first foothold in the country, since when ithas clinched a flurry of more deals with UAE oil giant ADNOC.

"Zohr was used as a way in. Since then the group has rampedup operations lightning fast in an area that has some of theworld's biggest resources and that's on the doorstep of Asia,"said Mediobanca oil analyst Alessandro Pozzi.

In Qatar, Eni can count on good relations with the statepetroleum firm which recently bought Mexican oil blocks from theItalian company.

A decade ago Eni was struggling to replace reserves and lostcredibility over its management of the huge Kashagan oilfield inKazakhstan.

But giant gas discoveries in Mozambique and Egypt have sincegiven it the strongest discovery record in the industry,boosting its credentials with oil-producing nations.

In 2017 ADNOC presented its 2030 strategy plan to open upits energy markets to foreign operators and attract the skillsneeded to develop the exploration and production, refining andpetrochemical industries.

"When you are a country thinking, who can find the stuff,you look to Eni with its track record," said a source familiarwith Eni management.

(Additional reporting by Davide Barbuscia, Ron Bousso, CrispianBalmer and Danilo Masoni; Editing by Pravin Char)

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