Eni - Sustainability Report 2009

We are living an intensely interconnected world: production, energy, technology systems are linked, but also the risks related to them are global phenomena now. This does not mean that we can forget about local realities - one of the aspects of an interconnected world is that even local problems spread everywhere - but unless we take these problems on a global scale and cooperate globally we can't solve them.

Paolo Scaroni
Eni Chief Executive Officer

An international company such as Eni is global by defi nition: the product we make - essentially oil and gas - has a global market and it has been so for many years. Now the issue is how do we cope with the new threats of the world today looking globally at them. Of course we cannot make choices that belong to politics or to international organization, but certainly we can play a role in facing major issues like poverty, like climate change, like sustainable development of the Countries we work in. We consider these issues at the center of our strategy, in order to give answers from a global point of view. I have read an article of Professor Sachs a few days ago in which he suggests that the crisis suggests we should re-write the macroeconomic theory in which we live. I am not sure that we really have to re-write all of it, but certainly a large part must be rethought. Just an example related to what we do: last summer at the G8 we suggested a mechanism to control oil prices. To keep oil prices ranging between 60 and 80 dollars means that prices are high enough for the oil producing companies to survive, low enough for the economies of the world to start again being prosperous. At the same times, this range is high enough to allow renewable energies to be developed, stabilizing investments on them. This is just one area in which we need a global intervention, because certainly nobody can decide alone on it. This kind of mechanism and this is just one example of how we should be thinking globally if we want to find complex and concrete solutions for major problems.

It's sure that this crisis, which spread globally with extraordinary speed from Wall Street, is a good example of the negative effect of globalization phenomenon. What I wrote in the article is that there are other aspects to this crisis that we should take note of and that are not considered enough by traditional economic theories. This is actually a crisis of finances, but also of energy market, of environment, of food supplies - all wrapped into one. In this interconnected world where we have a resource crisis, we have a global social crisis. We are focusing on fi nance to try to stabilise every aspect of it, but in fact unless we take a holistic view we are not really going to get out of it in a reliable way, as the example of oil prices stabilization shows. If we want to solve problems for the longer term an integrated global view that goes from fi nance to energy, to food, to climate is required.
Actually the major companies in the world, like Eni, are more global than the Governments of the world. I think this kind of players are not just necessary to make business more sustainable, they are a sine qua non for the world, before and after the crisis.

I really believe that companies justify their existence only if they are looking for the long term benefit of the society which they operate. Everything we do in terms of Sustainability is aimed at giving to the Countries where we operate more than what we take. This means keeping an adequate level of spending in good times and in bad times.
Eni is a relatively young company - it has been founded after the second world war - and it had to fi nd its way into the oil marked in which other giants were already operating. The founder of the Company thought that the best way to enter into new Countries, particularly in Africa, was to fi nd a different approach, in which we have been sitting to the side of the Governments, trying to find solutions for the Country in many different areas which have nothing to do with oil, including infrastructure, agriculture, electricity. This has been extremely successful, because we have been the fastest growing oil company of the world by far and we still are. We are now the number one oil and gas producer in Africa. In my view, this is due to that approach that today we call sustainability, but at that time was just a simple way of approaching Governments and Countries. We continue that path because we are convinced that the survival of our business depends on these capabilities to work for the long term of the world and of the Countries we operate in.

I call this approach leadership role. A serious leading company says: "We are going to make investments in Africa, because we don't want to be thrown out from this Continent tomorrow, we don't want social instability to make it impossible for our workers to go to an oil site, or live there with their families".
If business pursues narrow objectives we are going to have a wrecked world system. If business is conscious of being the repository of hundreds of thousands of workers in dozens of Countries, owning leading technology and investments we are going to have key solutions.
However, none can do it alone. We need partnership with the global community, among companies, Governments and civil society.
This is the meaning of the Millennium Development Goals. Simply the fact they were set on a specific basis and with a time commitment can be considered as a remarkable result, even if they are not going to be met by 2015. It's a set of eight big goals defined at the beginning of the Millennium to drive the change.
I think they have been very useful, for example, to rise the attention on the need to get children in schools, to make sure that there are functioning health systems everywhere in the world, to give farmers help to make their cultivations more productive. Because it must be clear that the poorest of the poor need technology, know-how, equipment, good seeds, fertilizers, energy, not handled money.
And here come another lesson we can learn from the actual stage of Millennium Development Goals. If development were run on a business bases with bottom lines and accountability on all sides, we would be meeting the millennium development goals. This is why I think partnerships must be reinforced between public and private sectors to make the difference in a context like Africa, because companies - and managerial approaches - can really make the difference.

What we do in developing Countries is quite simple, in my view. Inside a framework like the one provided by Millennium Development Goals, we set our own objectives, we decide exactly what we can do and we follow our methodology: bottom line, goal measurement and precise responsibilities. I give you just an example: flaring is a major issue and Governments all over Africa are trying to set a deadline for it. They make declarations about the need to stop flaring by - for example - 2010, but they don't follow through with actions to reduce this practice, so that they are forced to postpone the deadline. As a Company, we fixed ourselves a limit for flaring and we started a fairly simple action: we produce electricity from flaring in the Country we operate in. This way we do not waste gas, that is a precious hydrocarbon, we avoid local pollution, we reduce CO₂ emission and we give a major contribution to the development of the Country because electricity is the key for development. This is why we are by far the biggest producer of electricity in Africa. Normally oil companies don't like to produce electricity, because you get paid in local currency while oil is paid in dollars and this is a regulated business and the price can be changed overnight. Anyway, we started in Nigeria in 2001 and we're now thinking of doubling our plants, we continued in Congo, we are going to work this way in Angola and we might do this in Ghana in the future. We found that power generation is the most concrete way to match the fight against pollution and CO₂ emissions, industrial development and, by the way, giving also a reasonable return on investment.
As for women condition and children health is even more complicated, even in producing Countries, which are fairly rich and normally have small population.
In those oil Countries all talents of the Country are attracted by the professions concerning oil, because it's easier to get good earnings in dollars. This means that all the rest, from agriculture to infrastructures to healthcare are spoiled by the best people and competencies of the Country. This is way there are fields that seems quite far away from oil where an international company can play a major role in helping people. This is what we do particularly in health, building hospitals, running hospitals or vaccination campaigns as the ones in Africa against the major childhood diseases. All this is relatively inexpensive, but the kind of returns that you can have carrying out a vaccination program for hundreds of thousands of children is a phenomenal result. We need a relatively small amount of money, but a big organizational effort. We, as international companies, have the right people to do this and the project management capabilities that make it possible.

This is a good example of why I say that matching private and public approach is so important. The Copenhagen process was an example of just the opposite. It was not a well run negotiation because it was operating at a very ethereal, abstract level. Business was not really invited to be part of the discussion, even if it's the one that can provide technology and know how to lead the change. This is why I have been discussing with the Government of Mexico - which will host the next round - ways to get much more practical, to focus on particular sectors, to engage technology, to start talking specifically about which are viable strategies and how much they would cost. We must admit this is an extraordinary complicated issue, that involves technology, political choices, production, daily life of everyone.
I am living in a Country where more than half the people don't even believe human-made climate change is real. The science is absolutely powerful on it, but the public is absolutely confused as well. And we must admit that company's lobbying is playing a role in creating this confusion. This is why I would like to see technologists, companies, civil society and not only diplomats negotiating on it.

I have a very strong opinion on this point - that is that we should not even start debating climate change if we do not embrace energy saving as the major issue. Energy saving can be convincing even for people who do not believe in climate change, because even the ones who don't believe in it can be convinced that energy saving avoids pollution, benefits everyone's personal finance and extends the life of hydrocarbons, in the meanwhile we find a right way to employ renewable energies on a large scale. Just an example: if the US citizens would replace their cars with the same cars that Europeans have, this would save 4 million barrels a day of oil, which is roughly the whole production of Iran.
This is why I agree that the only way to find solutions to complex global issues like climate change, poverty, energy needs is to adopt a more practical approach, involving all the actors that want and can play a role. Eni is proud to be one of them.