• This Day (Nigeria) aagm: Political Economy of Sustainable Democracy in Nigeria (2)

investment already done.
MARCO MANGIAGALLI: Free cashflow.
LUCIANO SGUBINI: Free cashflow.
MARCO MANGIAGALLI: Yes.
TIM WEST: Free cashflow.
MARCO MANGIAGALLI: Now, down there, Irene?
IRENE HIMONA, ANALYST, MORGAN STANLEY: Irene Himona, Morgan Stanley, 2 questions please. First, a question for clarification, Mr. Mincato mentioned that you are now targeting cashflow neutrality at $20. But, if I understood correctly, you're raising the mid-cycle oil price assumption from $20 to $22 in 2009, [indiscernible]. So, I'm just wondering, is the cashflow neutral framework supposed to $20 or $22?
And my second question was on capital spending. You announced the 4 year budget of E26.9b, up from the last plan of E25.5b and, I believe, you mentioned this is defined to complete the sale of [Nanradagas] and new opportunities for growth. Can you please clarify for us how much of the E26.9b is actually earmarked for organic spending versus acquisitions or new opportunities, and should we assume that all of these net proceeds will essentially go to acquisitions? Thank you.
VITTORIO MINCATO: Irene, as regards the cashflow neutrality, the $20 to a barrel is what we had in mind as the capacity of the Company to pay the investments and the dividends in the next core year on the basis of the assumption of the oil prices, of which have been mentioned. While the $22 beyond the full year's plan is what we use for evaluating the returns of the projects until their economic life.
As regards the question about the CapEx, well, for sure, I not sure I understood what you meant. But, for sure, starting from 2007, we won't have anymore CapEx related to the Snam Rete Gas business as far as -- which, by the way, are of a sizeable amount in the next, well, in 2005 and 2006. And to say that the whole amount of the possible cash-in of the sale of the share is allocated, the proposition is something which we can't say. Just it is further support to our capacity to meet our target.
MARCO MANGIAGALLI: Down there, the next line.
HUW WILLIAMS, ANALYST, CAZENOVE: Huw Williams here from Cazenove, just 2 quick questions on cash returns and then one on an operational question.
On the cash side, can I just confirm what I think I heard of the split between the interim and final dividend, that they will be equal portions, or is it going to be a different ratio between the 2.
And, maybe, if it's also possible, to give us some guidance on the dividend setting policy going forward. Could we be looking for high dividends in the future, or at we looking at a maintained level of E0.90?
Secondly, in terms of buybacks, clearly you've indicated that, if I'm correct, gearing is 1 of the key drivers behind the buyback process. Clearly, gearing is some way below your target level. So, can we assume, in that case, that the buyback program will be completed, i.e. the remaining E2.2b will be completed through this year? Then, can we look for a further program of buybacks once that has been completed?
And then the final question is on gas business in Portugal. Following the change of government in Portugal this week, do you see any change to your approach to the Galp and EDP restructuring that is probably being reworked at present, please?
STEFANO CAO: About the interim dividend and the dividend policy. As far as the interim dividend is concerned, in fact, yesterday the Board resolved to adopt a semi-annual payment as regards the dividend. So, in addition to the payment in the terms of E0.90 per share, which will be made next June, there will be, we can say, next October, since it will be based on the semi-annual results which will be approved in September -- next October there will an extra, well, an extra payment, yes, a new payment. The first semi-annual, and it is reasonable, even if it hasn't been formally resolved by this Board being a matter of the next Board which will be appointed in May. But I think that for your model reasons, it's fair to think that it could 50% of what has been decided to be a dividend for 2004 -- based on 2004 results.
As regards the dividend policy, I think that yesterday, already, Vittorio mentioned during the conference, well, the press conference, that we are now looking at E0.90 per share as a sustainable dividend policy. So, we are committed to stick to it for the years to come.
As regards buybacks and your elaboration about the fact that we will probably buyback E2.2b of shares in the next 10 months, I would like to remind you that, for us, buyback policy has always been an element of flexibility, and also that in these 4 years in which we implemented it we always applied a mathematical formula which we try to work on when we decided to adopt the buyback policy, which gives us an indication of how many shares, first, if and how many shares have to be bought on the market the following day, and this is based on the relative performance versus the alien stock market versus the target prices versus the analyst recommendations.
So, to be quite frank, for instance, in these first 2 months, we got -- we spent, let's put it this way, E25m, about E25m because of the way the formula worked, and we do not see since it gave us, well, satisfaction is an important word to be used, but it worked properly so far. We do not see any reason for changing our approach versus buyback.
MARIO TARABORRELLI: I refer to the Gulp issue.
HUW WILLIAMS: Okay, sorry.
MARCO MANGIAGALLI: I would like to remember that in January 2005, just a few months ago, we signed an agreement with the Portuguese government postponing the deadline by which any major size call option for the further participation in Gulp[. Such a postponement was agreed in order to provide the parties sufficient time to discuss other alternatives.
You know that at the end of last year, the European Commission denied the authorization for the realization of the energy sector in Portugal. So, now we have to sit with a new government to see other alternatives. We are waiting to see the new government as soon as possible.
UNIDENTIFIED PARTICIPANT: A question for Marco, first of all. Just on the CapEx. There's been some changes in the dollar/euro assumption. I just wonder it would be helpful if you could tell us how much of that E26.9b is dollar or dollar based?
Then the second question for Stefano, just on the Italian production rates. It looks as though you assume your defined rate of about 3% a little bit going forward. Can you tell us that's the more optimistic scenario than we had previous to this point and how does that compare to the 10% decline of last year?
MARCO MANGIAGALLI: Well, as regards the currency rate, which we have adopted for planning reasons, yes, we have changed the last year assumptions and we have used 1.36 for the year 2005, then 1.23, 1.20, 1.17 in the remaining years.
And, as regards the percentage of investments denominated in dollars, we can say that roughly 60% is in dollars and the largest portion is, of course, in the upstream division, for which it accounts for about 80/85%.
STEFANO CAO: Yes, I guess the first half of the question was about Italy, and the Italian production it is declining but I think, I mentioned already a number of times, that gas production is definitely declining. While we keep going ahead with the investments in the [Valdagry] and with the growth in production from Valdagry.
So, what you see is the result of the combination of 2 effects. I can give you an idea that, for instance, as far as Italy is concerned, we imagine to have still a production combine of oil and gas at the end of the period in 2008 in excess of 230,000 boe per day.
As far as the depletion, the depletion, what we have tried to provide is the expected yearly depletion rate of the declining field only. So, the 10% ought to be read as the combination of the -- coming from the fields which are declining. If you sum up the fields which are declining, the fields which were growing in production, the depletion of the portfolio is 2%. This is the analysis which we are providing this year, together with the presentation.
IAN REID, ANALYST, UBS: Ian Reid from UBS, 1 question on Kashagan and another on CapEx I'm afraid, Marco.
Firstly, on CapEx, Stefano, you've built several successful exploration wells around the Kashagan main discovery, and you've obviously made some fairly substantial discoveries there. I wonder if you could tell us what the total resources are that you've discovered outside the main Kashagan field. That is, what's the upside to the 13b barrel number which we've already got and what that could mean potentially for the production rates out into the future?
And secondly, on CapEx, Marco, we've got the overall number now, but I wondered if you could split it year by year? You've given us the 2005. Can we have the 6. 7 and 8 one as well? Thank you.
STEFANO CAO: As far as the potential resources coming from the other fields surrounding Kashagan, I'm afraid I have to tell you that this is considered, at the consortium level, as being a sensitive information which needs to be disclosed by the consortium at the time of -- when the time will come.
What we are trying to represent under the opportunities is the possibility -- the also -- within areas which are already part of our contractual areas, we might launch additional projects, and this is in the 1 of the possible items which are part of this E600m per year opportunities and which we see as supporting the growth beyond the 2008 period. I'm afraid this is as much as I can go in terms of specific numbers.
MARCO MANGIAGALLI: As regards the CapEx for 5 [indiscernible], we are forecasting 7.3b for 2005/2006, then we have the deconsolidation of Snam Rete Gas and you have 6.3b and 6b in the remaining 2 years.
IAN REID: Thanks very much.
MARCO MANGIAGALLI: Who else? Down there, sorry.
UNIDENTIFIED PARTICIPANT: Hi, [indiscernible] Energy. A few questions. You mentioned that there's planned retail expansion in selected areas of Europe. Could you give some details on what those areas are, specifically with reference to Portugal and Spain?
And then another question, is it still really a priority to reduce SLD capacity with improvement in margins that we see?
MARIO TARABORRELLI: The regions where we are planning to grow with our retail business are those countries which are around Italy, from Spain to Romania, excluding the former Yugoslavia, of course.
In those areas, we already made some acquisitions within the last few years, and we move with -- we go ahead with the usual financial criteria we apply to acquisitions, of course. We are not trying to grow for the sake of it, but we are trying to achieve a profitable growth as we did in the past, of course.
As far as the SLD capacity is concerned, we are planning to further reduce the SLD capacity in Sicily mainly, because, as you know, we have an agreement with them according to which we should get rid of the capacity we still have in the oil refinery in the short term.
Once the oil refinery has been disposed of, we -- I think that our program is completed, basically.
MARCO MANGIAGALLI: At the back, please.
UNIDENTIFIED PARTICIPANT: Hi, 2 questions in the upstream. 1, is just a point of clarification. The 2m barrels a day in 2008 offers you to do some portfolio management. I think you said that there were some acquisitions in that number, just to repeat it?
And then the CapEx includes E600m per annum of opportunity. That opportunity, is it including the amount that you expect to spend on acquisitions to hit the 2m barrels a day?
And then just the follow-up question is on exploration, E600m per annum obviously translated into dollars and that's your finding cost. How comfortable do you feel that that will be enough to avoid a -- sort of a compression of your reserve license? What do you feel will be the low point in terms of reserve license as we look into growth out for 2008?
STEFANO CAO: You are quite right. The 2m barrels in 2008 includes some of portfolio. As you know, we are also bringing to conclusion our rationalization process. Our portfolio rationalization process.
So, on 1 side, we expect to divest some producing assets, maybe very mature and close to the end of the life of those fields. At the same time, we will be looking at some assets. Only assets we'll be looking at opportunities to substitute the production which we are failing and getting a little bit more out of them.
Overall, just to give you a flavor of the overall market, of the combination of the 2, in terms of contribution to 2008, it's something in the range of 40,000, 41,100 barrels boe per day.
In terms of -- and this is included in the E600m per year. Sorry, I was not addressing 1 of your questions.
E600m exploration, I think you ought to be looking a little in the perspective where we are coming from. For a number of years, we have been exploring, doing benchmarking on the service and production. We have been exploring more than some of our peers and I think, in some cases, it has been mentioned as 1 of our problems, I remember.
Of course, the world is changing and what I can tell you is that with the improvements of the portfolio of our exploration, which is the result of a number of actions, some of which I explained also today in terms of focusing the exploration process and, of course, working on the technology, I believe that that level is sufficient to provide out of the exploration what we need to replace our production going forward.
MARCO MANGIAGALLI: Okay, there are no more questions from the floor. Let me check if there are any questions from the conference call.
OPERATOR: Yes, thank you. We have 2 questions from the conference call so far. We have our first question comes through from Jason Kenney from ING. Please go ahead with your question.
JASON KENNEY, ANALYST, ING FINANCIAL MARKETS: Good afternoon and congratulations on continued strong performance. 1 about CapEx question was already answered and I know you're unlikely to comment on the potential for specific acquisitions in North America. But if given the choice and with your hurdle rate limits in mind, would you prefer a new opportunity position in Canada heavy oil, or more U.S. Gulf of Mexico deep water acreage?
And then secondly, could you comment on the recent press speculation for potential collaboration agreements in Russia financed by Eni stock based on the growth in the share price?
STEFANO CAO: Yes, the idea was to give you a little bit of the recipe of opportunities, but each and every of those opportunities will need to be thoroughly analyzed in its own right. So, certainly, as I said, we are looking at opportunities in the -- in Canada, and allow me to say also in Venezuela. Whether we'll be successful in 1 or the other that does, of course, need to be seen. But that is certainly 1 of the avenues which we intend to pursue and pursue very aggressively to complement our portfolio.
Other areas where we believe there are assets of our interest, well, by definition, the deep water Gulf of Mexico. I think it's a good region, but I would tend to look also at opportunity in the far eastern area, both in Indonesia and Australia, and opportunities which would imply not only oil, but also gas. Gas, of course, which, at this stage, would still need to find a market, but with the projection we see in terms of growth of consumption, I think that is certainly an area with -- at which we have to look very carefully.
In terms of Russia and the speculation which we have seen in the recent weeks, I think we can confirm in this occasion that, yes, we are looking but we have been looking for -- since a long period of time to possibilities in Russia. But much more in terms and only related to assets.
We are going ahead with our exploration. If there is an opportunity to acquire an asset, fine. At this stage, we are not interested at all in taking participation which would seem to us as being a more financial participation than industrial opportunities.
JASON KENNEY: Great, thanks very much.
MARCO MANGIAGALLI: And the last 1, the second one question from the conference call?
OPERATOR: Okay, thank you. Yes, we have a question through from the line of Sven [Belprossieu] from [John F Herald]. Please go ahead with your question.
SVEN BELPROSSIEU, ANALYST, JOHN F HERALD: Yes, good afternoon. Would you tell me, concerning your land position in Libya, I'd like to know how much of it is developed and, in addition, the recent transaction values there imply any upside for your existing land position in Libya?
STEFANO CAO: I am not sure I fully understood the question about Libya. I can try to give you a little bit of an answer, but then you may be asked something if I missing something.
Libya, our position in Libya, you know, it's a very strong one, and next year when the second phase of the gas project will come into fruition, we shall have a level of production of 240,000 boe per day.
Certainly, that is, by definition, a very sound and strong position, but that does not imply at all that we'll stop looking at additional acreage. Obviously, with the focus on acreage which is surrounding areas where we are already operating.
As far as the outcome of the first and very transparent bid process which has been launched by NOC, I have to say that we have not been successful, but for the simple reason that probably we were not as anxious as other company. But, on the factual basis of our position in the country to take a position. The obvious consequence is that we shall keep looking very carefully at the other rounds which we'll come out with, but we'll judge them on the basis of the criteria which we have established for our company. Which means, if we are successful, fine, if we are not, we'll go on with our position anyway.
SVEN BELPROSSIEU: Okay, so that if you were to mark your acreage position in Libya, market to market, on the basis of recent transactions, do you believe that there would be a significant increase in the value of your land position there?
STEFANO CAO: Significant position. It depends on the former construct which we -- you have in the form of [Defsa] which you have. If you have to make a judgment, on the level of competitiveness, as I said, the level has been very high. What was the trigger of the competition, it was the establishment of the amount of cost oil which was for the, say, second party to cover for operating costs investment, operating costs, of course, of exploration which we have to recover over the year of the field. And then, obviously, if the level is the level at which we saw this very competitive bidding, you know, it tends to dilute your position more and more, which means you have to wait many more years to have a return from your investment and, hopefully, a profit.
This judgment takes into account your position in the country. So, when you say that there is an acreage next to elephant, which is the field which we operate, of course, our evaluation was based on the fact we are operating elephant. We are building a dedicated pipeline from elephant to the coast and that any acreage any additional resource, of which we fund around elephant, will enjoy the fact that we already have the infrastructure. But, still, at the end of the day, you have to do your assessment based on the amount of cost oil which you have access to and if the overall is positive, you go ahead. Otherwise, you have done the best you could.
SVEN BELPROSSIEU: Thank you very much.
STEFANO CAO: You're welcome.
MARCO MANGIAGALLI: Okay, we can end this presentation. Thank you for attending to everybody and speak to you soon. Bye, bye.
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Document FNDW000020050315e131000ru
Hydrogen and the New Energy Economy: Why We Need an Apollo Mission for Clean Energy
Gresser, Julian; Cusumano, James A

4,651 words

1 March 2005

Futurist

IACA

19

Volume 39; Issue 2; ISSN: 00163317

English

Copyright (c) 2005 Bell & Howell Information and Learning Company. All rights reserved.
Creating a whole new economy-one that no longer depends on oil-will require the best thinking from the brightest minds. Two energy researchers detail why this mission is urgently needed and outline what it will take to build a Hydrogen Economy.
Shifting the global economy away from dependence on rapidly depleting supplies of oil to renewable, clean-burning hydrogen must happen sooner rather than later. Any thought that the transition can be gradually implemented over the next 40 to 50 years mistakenly assumes that there will continue to be enough cheap oil for the foreseeable future and that new discoveries and technological innovations can always fill in any gaps. Such assumptions are seriously flawed and imperil national and international stability.
In 1956, Shell Oil geologist M. King Hubbert predicted that U.S. oil production (barrels pumped per year) would peak in the early 1970s. Most geologists at the time rejected Hubbert's analysis until 1970 when oil production peaked within the lower 48 states. Since then, numerous respected geologists have refined Hubbert's methodology and have applied it to worldwide oil production, country by country. They concluded that world production of oil will peak between 2004 and 2008. Today, as in 1956, many industry and most political leaders either reject this analysis or ignore its projected consequences.
Most geologists estimate that about 2 trillion barrels of oil were formed in the earth over millions of years. To date we have pumped out about half of this supply. Despite years of generous government subsidies and continuing worldwide