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INSIGHT-Eni bets big on Zohr explorer finding new treasure

From Reuters - October 6, 2017

MILAN (Reuters) - Italian oil major Eni (ENI.MI) is betting billions on Luca Bertelli being able to achieve something hes been doing since he was nine years old: spotting things others overlook.

The geologist, who heads Enis exploration team, began collecting rocks as a boy growing up in Tuscany, developing a curious eye that eventually led him to discover two of the worlds biggest gas fields this century.

His latest success, the Zohr field off Egypt, sits in an area that Royal Dutch Shell (RDSa.L) pored over for years before Bertelli persuaded his boss to embark on a drilling program that turned up the Mediterraneans largest gas discovery.

Now the 59-year-old and his team are under pressure to show they can keep finding treasures others have missedthis time in waters off Mexico where former state oil monopoly Pemex has been exploring for decades.

We feel theres room for surprise, even in areas previously explored, Bertelli said up in his 12th-floor office in Milan, fingering a specimen of crumbly oil-rich rock from the Amoca field it won, with two other fields, in 2015.

Bertelli is a lynchpin in Enis corporate strategy which in recent years has seen it break ranks with major rivals and ignore the rush to shale, focusing instead on eking out the worlds conventional energy resources.

In recent years weakness in its downstream businesses like refining and chemicals have dragged on profits and placed more of a premium on securing success in upstream exploration.

In its new frontier Mexico, Eni has so far targeted shallow waters, close to the coast and Pemex infrastructure facilities - just the kind of target more likely to be picked over already and be on the radar of larger rivals with deeper pockets.

But Bertelli told Reuters that Eni was embarking on a more aggressive exploration program from 2018 with a special eye on Mexico where it will bid in upcoming tenders in deep and ultra-deep waters.

We believe Mexico is one of the last major opportunities to access material oil assets in unexplored or under-explored areas, he said. There arent many of them left.

Drilling deepwater wells thousands of meters under the sea is far more costly and risky than exploring shallow water or shale deposits, but potential rewards are much higher. Last year Eni drilled only five deepwater wells from the 15 or so two years before when crude was double current prices.

So the pressure is now on Enis geologists to identify the right rocks and wells - and the competition is heating up; majors including BP (BP.L) and Shell are also bidding for acreage in Mexican waters.

INTUITION + SUPERCOMPUTING

Eni is the first foreign oil major to drill off Mexico since the government broke up Pemexs 80-year-old monopoly in 2013.

The company has not disclosed its investment plans, but Mexicos oil regulator chief, Juan Carlos Zepeda, told Reuters its decision to fast-track Amoca would prompt spending of more than $1 billion.

Eni declined to comment on that figure but is undoubtedly betting big on Bertellis team extending its record as the industrys most successful conventional explorer, as measured by energy consultant Wood Mackenzie.

Between 2010 and 2015, Eni's reserve replacement ratio - a key metric showing the amount of reserves added compared with the oil and gas produced - was 480 percent, excluding shale. (See graphic: reut.rs/2yqAptI)

That was way ahead of other majors with Statoil in second place with 126 percent and ExxonMobil third with 54 percent.

The story of how Eni discovered the giant Zohr field in 2015 offers a window into how Bertelli and his team operate; geologic intuition and experience, he said, told him there could be something there that other companies hadnt spotted.

LOW RISK = SMALL SUCCESS

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