Oil major Eni looks to cash out lucrative Pakistan assets

KARACHI: Italy-based Eni SpA is seeking an exit from Pakistan’s upstream sector that according to the company’s own estimate embraces massive untapped potential, as its dizzying post-corona global losses make the oil giant to cash out its lucrative asset, market observers said on Saturday.

Eni is looking to sell its exploration and production business after two decades of operation focused around three operated and six non-operated producing assets, according to a company’s document.

A The News analysis showed that Eni Pakistan is yet to tap approximately 65 percent of reserves in the blocks licenced to the company.

The blocks’ remaining net commercial reserves are estimated at 20 million metric barrels oil equivalent “with further upside potential,” the company said.

“There is scope to increase recovery,” it added. Pakistan is one of the world’s fastest growing gas markets, measuring gas demand at around 49 billion cubic meters (bcm)/year. It is forecast to rise to around 55 bcm/year by 2028.

“With such KPIs (key performance indicators), this exit, can say, seems to be a profitable bet,” a senior energy analyst said, requesting anonymity on his prospective involvement in the deal.

Eni didn’t comment on any reason behind an apparent early exit. However, this may be linked to its $3.2 billion net loss in the first quarter of 2020 due to slumping oil demand and subsequent price turbulence amid the pandemic shutdown.

In 2018, Austrian oil and gas company OMV also sold its majority stake in Pakistan to Hong Kong-based United Energy Group for $177 million.

Pakistan allowed liquefied natural gas (LNG) import to offset falling domestic production. LNG imports increased 15 percent from 2019 to 2020.

Demand and supply gap for gas that meets half of energy needs is expected to cross 4,500 million metric cubic feet per day in next two years, according to the Oil and Gas Regulatory Authority.

As of 2019, Eni produces 37 billion cubic feet of natural gas annually in Pakistan, according to its website. Its producing assets are the operated Bhit, Badhra and Kadanwari assets and the associated processing facilities, and the non-operated Zamzama, Sawan, Latif, Miano, Tajjal and Mitha assets. Assets have partners, such as Ocean Pakistan (formerly BHP), UEG (formerly OMV), OGDCL, KUFPEC and PPL.

ENI also owns 10 megawatts of photovoltaic plant near the Bhit gas field, which provides power to the upstream operations. “New acquirer can be from local or international scene,” an analyst said.