Eni Secures New Offshore Gas Hub Approvals in Indonesia

Eni SpA E, an Italian energy giant, has received approval from Indonesian authorities to develop two offshore fields, paving the way for a new gas and condensates production hub in the Kutei Basin off the coast of Indonesia. This move is set to enhance Eni's gas production capacity significantly. It also marks a strategic expansion of the company in the Asian market.

New Production Hub in the Kutei Basin

Eni's new venture involves the integrated development of the Geng North (North Ganal PSC) and Gehem (Rapak PSC) fields. Together, these fields will form the "Northern Hub" a new offshore production center in the Kutei Basin. The project will tap into the 5 trillion cubic feet (tcf) of gas and 400 million barrels of condensates from the Geng North discovery, announced in October 2023, as well as 1.6 tcf of gas from the nearby Gehem field.

The development includes the installation of subsea wells, flowlines, and a newly built floating production storage and offloading (FPSO) unit. This FPSO will have the capacity to handle approximately 1 billion cubic feet per day (bcf/d) of gas and 80,000 barrels of condensates per day, with a storage capacity of 1 million barrels.

Gas and Condensates Management

The gas produced from these fields will be processed on the FPSO before being transported to the onshore receiving facilities at the Santan terminal and integrated into the East Kalimantan pipeline network. The gas will then be partially liquefied at the Bontang LNG facility for export and supplied to the domestic market.Meanwhile, condensates production will be stabilized and stored onboard the FPSO before being offloaded via shuttle tankers.

Expansion of Existing Operations

In addition to the Northern Hub, Indonesian authorities have also approved the development plan for the Gendalo & Gandang fields (Ganal PSC), which hold an estimated 2 tcf of gas reserves. The gas from these fields will be developed using subsea wells connected to the floating production unit (FPU) Jangkrik, extending its production plateau by at least 15 years.

Following a recent 20-year extension of its IDD licenses for the Ganal and Rapak blocks, Eni aims to establish a production capacity of approximately 2 bcf/d of gas and 80,000 barrels per day of condensates in the East Kalimantan region. This expansion will cater to both domestic and international markets and leverage synergies with existing facilities such as the Bontang LNG plant and FPU Jangkrik.

Strategic Milestone for Eni

Claudio Descalzi, CEO of Eni, emphasized the strategic importance of these projects, noting that the approval of the Northern Hub and Gendalo & Gandang development plans by Indonesian authorities is a critical step toward the final investment decision for both gas projects. This aligns with Eni's goals of decarbonization and energy security. Descalzi pointed out that this development is a significant breakthrough for Eni in Indonesia, strengthening the company's position in the Kutei Basin, a prime location close to its key markets and existing infrastructure.

Future Exploration Plans

In addition to the current developments, Eni plans to conduct a drilling campaign over the next four to five years to explore the near-field potential within its operated blocks in the Kutei Basin. These blocks are estimated to contain more than 30 tcf of gas, which is considered largely de-risked following the recent Geng North discovery.

Collaborative Efforts and Outlook

Eni holds an 83.3% stake in the North Ganal Block (Geng North field), with Agra Energi holding the remaining 16.7%. For the Ganal and Rapak blocks, Eni owns an 82% stake, with Tip Top holding 18%. Eni's close collaboration with SKK Migas, Indonesia's oil and gas regulator, has been pivotal in achieving these milestones. These projects are expected to boost local content, increase the utilization of the Bontang LNG plant's capacity and secure gas supply for domestic consumption.

With these strategic initiatives, Eni is set to strengthen its role in the global energy market while contributing to Indonesia's energy security and economic development.

Zacks Rank & Key Picks

E currently has a Zack Rank #3 (Hold).

Investors interested in the energy sector may look at some better-ranked stocks like SM Energy Company SM, MPLX LP MPLX and TechnipFMC plc FTI. While SM Energy currently sports a Zacks Rank #1 (Strong Buy), MPLX and TechnipFMC carry a Zacks Rank #2 (Buy) each.

SM Energy is set to expand its oil-centered operations in the coming years with an increasing focus on crude oil, especially in the Permian Basin and Eagle Ford regions. The company's attractive oil and gas investments should create long-term value for its shareholders.

The Zacks Consensus Estimate for SM's 2024 EPS is pegged at $7.57. The company has a Zacks Style Score of A for Value. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past seven days.

MPLX derives stable fee-based revenues driven by long-term contracts, with minimal exposure to commodity-price fluctuations. The partnership's robust capital expenditure forecast for 2024, along with significant expansion initiatives, underscores its commitment to sustainable growth.

The Zacks Consensus Estimate for MPLX's 2024 EPS is pegged at $4.21. The company has a Zacks Style Score of B for Value. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.

TechnipFMC is a leading manufacturer and supplier of products, services and fully integrated technology solutions for the energy industry, with a focus on the subsea segment in offshore basins worldwide. FTI's growing backlog ensures strong revenue visibility and supports margin improvements.

The Zacks Consensus Estimate for FTI's 2024 EPS is pegged at $1.25. The company has a Zacks Style Score of B for Value. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.

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