Eni: Government take cuts into profits

Eni SpA Chief Executive Paolo Scaroni said April 20 that the share of profits taken by governments of oil-rich countries is cutting international oil companies’ profits, in some cases below their capital costs.

“The average government take is now moving to overcome the critical barrier of 90 percent, which means that oil companies’ profitability is decreasing,” the CEO of Italy’s biggest oil and gas company by revenue said in a speech at the International Energy Forum.

Western oil majors have had to face a spate of renegotiations of their contracts as hydrocarbon-rich countries aim for a bigger slice of profits on the back of surging crude prices.

International oil companies need to “profoundly rethink their business model in order to survive and prosper,” Scaroni added.

Government ministers from oil-rich nations and international oil company executives were meeting in Rome for a three-day energy conference that ends April 22. While the energy ministers of most OPEC states will be present, the group was not expected to announce any policy shifts during the International Energy Forum, which was being as crude oil prices have reached a new high of US$117 a barrel.

Italy’s outgoing Development Minister Pier Luigi Bersani told the conference in his opening remarks April 20 that the high price of oil will have an impact on inflation for all of 2008.

“The price of oil has had an impact on the inflation dynamic in many countries and it is reflected in part also on food stuffs in general,” Bersani said. “This dynamic will persist for all of 2008.”

On the sidelines of the conference, Eni signed a memorandum of understanding with Qatar Petroleum International to pursue key joint projects in Africa and the Mediterranean focusing on natural gas and crude oil. It also envisions cooperation in the petrochemical industry and power generation.

—The Associated Press