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Italian Oil Giant Completes Offshore Oil Project In Record Time, Could Be Disruptive For The Industry

Italian Oil Giant Completes Offshore Oil Project In Record Time, Could Be Disruptive For The Industry
Sceptics from both inside and outside of the Italian energy giant EniSpA were defied when the company oil started pumping oil form the Mediterranean’s largest gas field situated approximately 200 kilometers (168 miles) off the Egyptian coast.
The Italian company had said that it would lift gas out of the Zohr field  two years ago even while many had raised questions about the ability of the company to do so.
“We presented our development plan to Egypt’s minister after two weeks,” Chief Executive Officer Claudio Descalzi said in an interview in Port Said. “Nobody believed what we were going to do, analysts said we were crazy; now we can say they were wrong and we were right.” 
For the oil industry, the time period of just over two years is a phenomenal task as companies take a long time before that they can make oil reserves productive. Shale gas producers however are accustomed to shorter time frames from discovery to production.
“Its sheer size ensures a very competitive positioning along the cost curve compared to new supply coming onstream elsewhere, in particular from US shale,” said Alessandro Pozzi, an analyst at Mediobanca SpA in London.
It was at breakthrough speed that the company has been able to construct the pipelines, offshore platforms and processing facilities at Zohr when the industry is used to witnessing time periods of over a decade on turning a discovery into a productive unit. According to an Eni memo seen by a section of the media, only 10 per cent of analysts had given the company any chance of producing gas “some time in 2019”. “After 2021” was more likely was the belief of twenty-four percent of the analysts.
This event should create a transformation in the oil industry if the model used by the Italian company is replicated. This would be the gain form the event apart from the potential profits for Eni and the benefits for the Egyptian government.
“Our philosophy is time to market,” Descalzi said. “We changed all the industry strategy by breaking the contractual schemes and starting to move from investment authorization to production with parallel steps."
Eni employed direct tender process for technical components instead of opting for a general contractor for Zohr, so that the project made quick advances. This despite the fact that the project used the longest umbilical cable ever. 200 kilometers of pipe needed to be shipped from Europe at the onshore facility on the coast near Port Said.
According to the company, between 2014 and 2019, the Italian company had managed to make earnings of over $9 billion from its exploration activities by this strategy used by Eni.

Christopher J. Mitchell

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