Eni SpA’s chief executive officer called for oil producers outside OPEC to join the group in cutting production to stabilize the market and said his company could still make money with crude at $50 a barrel.
“OPEC alone is not enough,” Eni CEO Claudio Descalzi said Monday in a Bloomberg TV interview from Abu Dhabi, where energy companies are meeting to discuss the industry’s future. “We have to find a more general consensus among all producers.” Oil at $50 “is OK,” he said. “Looking at our break-even price, that is enough.”
Eni, which posted a greater-than-expected third-quarter loss, is reducing capital expenditure, Descalzi said. Many other companies in the energy industry were doing the same, “bolting” down their capital spending, BP Plc CEO Bob Dudley said in a separate interview at the Abu Dhabi event.
OPEC, which pumps about 40 percent of the world’s oil, agreed in Algiers last month to trim output for the first time in eight years to counter a supply glut, and it’s trying to persuade producers from outside the group, such as Russia, to join the cuts. OPEC wants to put the changes into effect when it meets in Vienna on Nov. 30, with the agreement to last one year starting in January, state-run news agency APS reported Monday, citing Algeria’s energy minister, Noureddine Boutarfa.
Brent crude, the international benchmark, has dropped below $50 a barrel since last month on concern that OPEC won’t be able to reach an accord with non-OPEC producers. Futures rebounded 1.2 percent to $46.11 a barrel by 12:20 p.m. in Dubai, the first advance in seven sessions.
“OPEC cuts are quite important for our financial investors,” Descalzi said. “They like to know that somebody is taking care about the market.” The group has “a very strategic role that can give assurance to our investors that we have a floor,” he said.
Descalzi’s comments echoed a call last week by Saudi Arabia’s former energy minister Ali Al-Naimi, who urged producers outside OPEC to cut their production to help the group steady the market. Al-Naimi told a meeting in London that “it’s good” if other producers “cooperate and deliver.”
Rome-based energy producer Eni wants to maintain production while reducing capital expenditure at least through next year, Descalzi said. “2017 will still be a very low capex year, and we have to try to optimize, and we have to reduce capex but be able to maintain production.”
BP too is trimming capital spending, to about $16 billion this year compared with a previous estimate of less than $17 billion. Capex was static across the industry, due largely to cost savings and deflation, BP’s Dudley said. “I think we’re going to be about the same level next year as we have been this year,” he said.
Eni’s Descalzi said oil prices would be high enough over the next three years for his company to maintain investment spending and its dividend. “Our number that’s good to cover our investment, and our operating cash flow is $50.” Prices could trade as high as $65 in the next three years, he said.
Eni is among major oil producers that are under pressure since crude prices plunged to less than half their 2014 peak levels. The company pumps crude in Iraq and is developing offshore natural gas fields in Egypt and Mozambique.