Eni CEO Warns Over Oil Price Disruption

Eni CEO Warns Over Oil Price DisruptionEni CEO Warns Over Oil Price Disruption

Italian oil and gas giant ENI may not have any investments in Iran, but its CEO Claudio Descalzi sees disruption ahead for oil markets due to the reimposition of US sanctions on OPEC's third-largest oil producer. "The impact is more for the crude oil price, because Iran now is exporting about 2.6 million barrels per day and if we go back to the first sanctions, they were exporting 1.5 million," Descalzi told CNBC's Hadley Gamble on the sidelines of the ADNOC Downstream Investment Forum in Abu Dhabi on Sunday.

When sanctions were imposed on Tehran in 2012, Iran's oil exports dropped to approximately 1.5 million bpd. Since the export restrictions were lifted in 2015, as part of the multilateral deal that offered economic relief in exchange for curbs on Iran's nuclear program—formally known as the Joint Comprehensive Plan of Action—that figure increased by more than 1 million.

US President Donald Trump announced on May 8 that he would leave the deal, immediately sending oil prices into a tailspin. "So there is a lack of 1 million in the market and that is going to impact the oil price, and also the balance of different crudes. Because 1 million is going to Europe, the rest to the Far East," the Eni chief said.

"We have a demand that is increasing 1.6 to 1.7 million bpd yearly average, so that is going to create a disruption in terms of cost and price. And when we have this kind of situation, the landscape becomes very uncertain."

  Uncertainty for Investors

Still, price uncertainty ahead means uncertainty for investors, particularly those looking at long-term, multibillion dollar projects like those required for the extractive sector. Descalzi noted that big investments are needed in the energy sector.

"And when there is a lot of uncertainty, the investment is not easy to be performed. But there are so many other geopolitical issues that the landscape is very difficult to understand where we're going," he said.

Asked if he thought Trump's decision was ill-judged, Eni's CEO pointed to its impact on Europe and stressed his hope for a diplomatic solution.  A raft of major European companies have been investing in and trading with Iran since the lifting of sanctions in 2015, including France's Total, Danone, Peugeot and Airbus.

Germany, meanwhile, accounts for 60% of European investment in the Islamic Republic, Reuters reported.

All of JCPOA's signatories besides the US—Germany, France, the UK, Russia and China—have pledged continued commitment to the deal.

"In any case Europe is still in agreement, so I think that diplomacy can find some solution, because Europe is the strongest ally of the US and the main impact of the Iran sanctions is going to Europe, as the impact of the Russian sanctions is going to hit Europe," Descalzi said.

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