ENI raises margin on lower crude output; products and biofuel take hit

London (Quantum Commodity Intelligence) – Italian energy major Eni's Q1 crude oil production fell 9% on the year to 814,000 b/d largely due to the effect of OPEC+ production cuts, but its overall upstream operating profit including natural gas was still up €400 million to €1.4 billion helped by improved benchmark Brent prices, the company said Friday.

The company's predicted upstream production including oil and gas for the rest of the year at 1.7 million boe/d, unchanged from the Q1 level, assuming average OPEC+ cuts of 35 million boe/d.

Eni's refining and marketing segment was badly hit by the rise in feedstock prices and the ongoing pandemic-related demand crunch in its key markets in Italy and Western Europe, with the reference refining margin turning to negative $0.6/b down from $3.6/b in Q1 last year.

Middle distillates margins were worst hit as consumption of jet fuel plummeted in line with the fall in air travel, it said.

Refining throughput was 6% up however at 6.4 million mt, aided by a 29% rise in throughput outside of Italy to 2.55 million mt even as rates in Italy fell.

The company's biorefineries also saw a slowdown in rates due to a "less favourable scenario than in 2020," falling 13% on the year to 163,000 mt in the first quarter, representing a utilisation rate of 65%.

Eni moved to bolster its presence in the biofuels space during the quarter, announcing a deal in March to acquire FRIEL Biogas, from which it intends to supply 50 million cubic meters per year to its network.

FRIEL owns 21 plants generating electricity from biogas and a plant for processing OFMSW - the organic fraction of municipal solid waste - which Eni intends to convert to produce biomethane.

The company also announced earlier this month that it is evaluating options to construct new feedstock pre-treatment units at its Venice hydrotreated vegetable oil biorefinery and started a new treatment unit at the Gela bio-refinery enabling the use of up to 100% waste products.

Eni wants to use a greater variety of feedstocks and completely cut out the use of palm oil, which is viewed increasingly as a non-sustainable feedstock in Europe, in its biofuels.

Like fellow energy major Repsol, the company is planning to spin off part of its retail and renewables business in order to fund investments in its energy transition plans.