MOSCOW (MRC) -- The new chief executive of Eni, the Italian energy giant, has put himself on a collision course with workers and possibly the Italian government with a plan to close much of the company’s unprofitable refinery network in Italy, said the New York Times.
Claudio Descalzi, who was named chief executive in May, has told union leaders that the refineries most likely to be closed are those at Gela in Sicily, Taranto in the Puglia region, and Livorno in Tuscany, according to local news reports. Together they account for about 40% of Eni’s refining capacity in Italy and employ more than 1,500 people.
Beside taking on the unions, Mr. Descalzi must secure the approval of the body that appointed him, the Italian government, which owns a 30% controlling stake in Eni.
According to local news reports, workers at the Gela refinery have staged protests, including the seizure on Wednesday of a terminal that receives natural gas from Libya. But some financial analysts say that Mr. Descalzi’s proposal is long overdue, one that should be emulated by other European energy companies.
Eni’s refineries are an unwanted legacy for a company that over the past few years has been shifting to the more lucrative business of finding and producing oil and natural gas. Mr. Descalzi led Eni’s exploration and production unit under his predecessor as chief executive, Paolo Scaroni, when the company made large discoveries off Mozambique and Norway, among other places.
With demand for petroleum products falling, the Eni unit that refines crude oil has lost an average of more than 100 million euros, or about USD136 million, each quarter since 2009. The marketing side of the business is profitable, partly offsetting the losses.
Those losses are thought to have amounted to EUR800 million last year alone and are likely to continue. Demand for refined products in Italy is continuing to fall, and Eni’s refineries are not as efficient as those of rivals, according to Bernstein.
Eni’s competitors face many of the same pressures. European refiners are being squeezed by weak economies; competition from United States refiners, which have access to cheaper oil and gas from shale; and new, more efficient refineries in the Middle East and Asia. Industry executives and analysts agree that Europe has too much capacity, but it is politically difficult to shut refineries and lay off workers, often in regions that are already hurting from declines in other industries.
So far, the protests against Mr. Descalzi’s plans have been relatively minor. Eni may try to appease the affected workers by offering them jobs elsewhere in the company, and by converting refinery sites to logistics depots or to serve other uses. A refinery at Venice, for example, has already been converted to process biofuels.
As MRC wrote before, Eni is open to talks with Gazprom about a possible partnership in Mozambique but is not aware of any interest from the Russian state gas monopoly in buying a stake in its gas assets there. Eni retains 50% of what is its biggest-ever gas discovery. The Mamba field holds an estimated 75 trillion cubic feet of gas.
Eni is an Italian multinational oil and gas company headquartered in Rome. It has operations in in 79 countries, and is currently Italy's largest industrial company with a market capitalization of 68 billion euros (USD 90 billion), as of August 14, 2013. The Italian government owns a 30.3% golden share in the company, 3.93% held through the state Treasury and 26.37% held through the Cassa depositi e prestiti. Another 39.40% of the shares are held by BNP Paribas.