Eni SpA (E) has decided to participate in the upcoming bidding round for the development of Nassiriya oilfield in Iraq. The decision follows a meeting held between Eni’s chief operating officer, Paolo Scaroni and the Iraqi Prime Minister Nuri al-Maliki in Baghdad earlier this week on the development of Zubair — one of the largest oil field in the country.
Earlier this month, head of the Iraqi oil ministry contracts and licensing directorate, Abdul-Mahdy al-Ameedi, said that four international oil companies, including Eni, had shown interest in the Nassiriya oil field development plan.
According to Eni, Maliki was satisfied with its operations in Iraq and looks forward to its wider footprint in the country. Eni also remains open to more operations in the country after discussion with Baghdad leaders. Development of Zubair comprises a $20 billion investment throughout the 20-year contract period. The field is expected to reach 1.2 million barrels of oil equivalent per day at full capacity by 2017. Iraq has joined hands with other international companies as well to boost its output to 12 million barrels per day by 2017.
Eni remains the operator of Zubair after securing the service contract in October 2009. The company’s associate partners in the consortium include Iraq’s Missan Oil Company with 25% share, Occidental Petroleum Corporation (OXY) with 23.44%, and Korea Gas Corporation with 18.75%.
Along with its consolidated subsidiaries, Eni is engaged in oil and gas, electricity generation, petrochemicals, oilfield services and engineering industries. We remain upbeat on Eni’s 2011-2014 strategic plans for the upcoming months to enhance production and control costs as well as recover profitability. But uncertainties associated with the group’s domestic gas business keep us wary, particularly as regulators continue to take an active interest in the company and the relative profitability of segments across the gas chain.
However, considering fluctuations in the global economy, volatile oil and gas fundamentals and operational disruptions in international regions, we remain on the sidelines and maintain our long-term Neutral recommendation on the stock.
