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Gulf-Times (Qatar): Eni downgrades output growth target on Kashagan field delays

Published: Sunday, 25 February, 2007, 10:51 AM Doha Time
ROME: Eni SpA, Europe’s fourth-largest oil company, cut its growth target for oil production through 2010 after delaying the startup of the Kashagan field in Kazakhstan by two years and losing production in Venezuela and Nigeria.

Output will increase by an average of 3% a year from 2006 through 2010, Rome-based Eni said yesterday. This year’s production won’t rise from last year’s level. A year ago, Eni said it would achieve average annual growth of 4% from 2005 through 2009.

The company and larger rivals including Royal Dutch Shell Plc and BP Plc are struggling to secure new sources of oil to meet rising energy demand.

Rome-based Eni on Thursday agreed to buy most of Etablissements Maurel & Prom SA’s assets in the Republic of Congo for 1.4bn euros ($1.8bn).

“The company is having trouble meeting targets; other companies are having similar problems,” said Niccolo Pini, who helps manage 800mn euros at Banca Ifigest SpA in Florence, Italy.

Eni, led by chief executive Officer Paolo Scaroni, said it would reach 2mn bpd of production in 2010. That’s one year later than it said in March.

Eni maintained a long-term target for growth of 3% a year through 2013.

Kashagan, the world’s biggest oil discovery in 30 years, won’t begin producing fuel until the third quarter of 2010, Eni said.

A year ago, the company said production at Kashagan would start in 2008.

The field will have peak output of 1.5mn bpd, 25% higher than the company’s initial target, said Stefano Cao, Eni’s general manager of exploration and production, at a presentation in Milan on Friday. Production will hit a peak no later than 2019.

Eni is developing crude deposits including the Kashagan field in Kazakhstan and is negotiating with Gazprom to gain rights to oil and gas resources in exchange for access to Italy’s market.

“Kashagan is a transforming project,” Cao said. Eni estimated the cost of the first phase of the Kashagan field at $19bn, up from a forecast of $10.3bn announced in 2004, Cao said.

Eni’s net income fell 28% in the fourth quarter to 1.52bn euros ($1.99bn) from 2.11bn euros a year earlier, after production declined and exploration costs increased, the company said on Friday.

Production in the three months slipped 0.6% from a year earlier, putting full-year output at 1.77mn bpd, an increase of 1.9% from 2005. That’s short of the company’s growth forecast of 3%.

Output suffered because the Venezuelan government in April took over the Dacion field and unrest in Nigeria reduced production there.

Production increases in Libya and the Gulf of Mexico partially offset losses elsewhere. –

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