* Weighing joint ventures in West Africa, Middle East
* Has held talks with BP, Total on West Africa JV -sources
* Eni's debt at 26.7 bln euros
* To open graphic in external browser, click here https://tmsnrt.rs/2RPYdlX
MILAN/LONDON, April 20 (Reuters) - Italy's Eni is
considering spinning off oil and gas operations in West Africa
and the Middle East into new joint ventures to help reduce debt
and fund its shift to low-carbon energy, according to company
and industry sources.
The move is part of a major overhaul the company launched
last year as it transitions into renewables and a gradual
tapering of oil and gas output.
Eni aims to replicate the success of its 2019 oil and gas
spin-off in Norway, where it formed joint venture Var Energi
with private equity firm HitecVision and retains a 69.6% stake.
That created Norway's second largest oil and gas producer
after acquiring Exxon Mobil's portfolio there for $4.5
billion, giving it production of about 150,000 barrels of oil
equivalent per day.
The investment has been highly profitable, paying Eni nearly
$1.3 billion euros in dividends since its creation.
"The company is working on doing more of the same (as Var)
with chosen partners in West Africa and the Near-Far East and
Far East," a source said without giving further detail.
Africa's biggest foreign oil and gas producer, Eni has prize
assets in Nigeria, Congo and Angola. It has big production
centres in Egypt and Libya, has rapidly built a presence in the
Gulf and is looking to grow in Asia.
Creating a separate entity will allow Eni to shift some of
its debt, which rose last year to 26.7 billion euros ($32.2
billion), off its balance sheet given it will no longer be
consolidated at group level, the sources said.
With lower debt, Eni hopes to raise new capital to build its
renewables and low-carbon business which will form the backbone
of the future company.
Eni has recently held talks with several large oil and gas
producers including BP and Total to merge parts of their
operations in West Africa and the Middle East, sources told
Eni, BP and Total all declined to comment.
BP and Total face challenges similar to Eni's in terms of
managing debt and low-carbon emissions but it remains unclear if
the talks will be successful, the sources said.
Europe's top energy companies were forced to raise record
amounts of debt after oil and gas demand cratered in the wake of
Eni Chief Financial Officer Francesco Gattei in February
told analysts that there are "opportunities" in business
combinations like Var Energi to remove debt from Eni's balance
"We aim to replicate our Norwegian Var model in different
countries, with potential business combinations which are
currently under screening," Gattei said at the time.
Other companies have gone down the same path in recent
years. BP merged its Norwegian operations with local producer
Det Norske in 2016 to create Aker BP, which trades on the Oslo
Large oil companies typically prefer operating oil and gas
fields, taking pride in their operational capabilities. But for
Eni, which has said its oil output will start tapering off after
2025, the JV model offers a way to cut costs and squeeze more
money out of the oil and gas division.
Eni, headed by veteran oilman Claudio Descalzi, is also
mulling spinning off its new retail and renewable energy
business next year in order to raise funds. It could list a
minority stake in a unit that could be worth around 10 billion
euros, according to sources.
Like its peers, Eni has set ambitious targets to slash
planet-warming emissions to net-zero by 2050 while rapidly
expanding its renewable power generation and biofuel capacity.
The joint ventures model offers companies a way to build a
new low-carbon business centred around renewables, power trading
and retail, while jettisoning legacy oil and gas businesses
which will be wound down over time, a senior source close to Eni
The new model also offers transparency to investors
regarding greenhouse gas emissions, he added.
"If you still co-own the new company you're still liable for
the emissions. But you can report them separately which allows
you to show investors how you are decarbonising your core
business," the source said.
($1 = 0.8297 euros)
(Additional reporting by Shadia Nasralla; editing by Jason