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Eni Eyes Mass Reforestation to Offset Growth

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If an oil company wishes to keep growing its operations while lowering its climate risk, drastic changes would be necessary to align its business model under those competing twin goals. Italy's Eni believes the usual steps -- like cutting flaring and methane, adding renewable assets and buying offsets from others -- are no longer enough to offset its ambitious growth plans, and sees a cheaper solution than carbon capture. The answer: It is planning one of the biggest reforestation projects of any Western oil firm. Eni wants to increase production from 1.85 million barrels of oil equivalent per day now to 2.4 million boe/d by 2025 while keeping its business model compliant with the Paris 2° target. This means achieving net zero emissions in its upstream unit -- so-called Scope 1 emissions -- by 2030, on an equity basis. Eni is among a growing number pushing the notion that planting trees can create an opportunity for fossil fuels to maintain growth and a long life span. Royal Dutch Shell talks of needing an Amazon rainforest-scale reforestation plan, and Total, Equinor and BP all say they are carrying out reforestation or buying offset credits. But environmental groups complain that these forests -- often involving highly mechanized large-scale plantations grown for timber -- have little positive impact on local communities. Eni said in a recent strategy update that it will plant trees to offset "residual upstream emissions" as it continues to focus on upstream growth, giving priority to gas and LNG. Under the 2019-22 strategic plan unveiled earlier this month, the company will increase its LNG portfolio to 14 million tons per year by 2022 and 16 million tons/yr by 2025 from 8.8 million tons/yr in 2018. Equity volumes will grow to more than 70% from 56% in 2018. It also plans to invest €1.4 billion ($1.6 billion) to increase renewables capacity from 200 megawatts in 2019 to 1.6 gigawatts by 2022 and 5 GW by 2025, with most growth coming in African solar photovoltaics. Eni expects these projects to generate average internal rates of return of 8%-12%, similar to those outlined by Shell this month. It aims to increase its retail customer base to 12 million by 2022, up 26% on 2018 numbers, and to double its retail power consumer base to 4 million. CEO Claudio Descalzi told investors that "buying carbon offset credits is no longer enough," so the plan envisages a "large forestry initiative which will create a natural carbon sink which will capture more than 20 million tons/yr of carbon dioxide by 2030." Media reports suggest this could cover 8.1 million hectares. Descalzi said Eni is going to do most "reforestation in countries where we operate, but generally, it will be in Africa, in places such as Mozambique and Ghana." There was also mention of Zimbabwe and South Africa. The Bonn Challenge -- launched in 2011 by the German environment ministry and the International Union for Conservation of Nature and backed by global leaders -- sets a global target of reforestation of 150 million hectares by 2020 and 350 million hectares by 2030 to absorb 1.7 gigatons of CO2 per year. Current commitments, excluding Eni's, total just under 171 million hectares. During a Q&A session after the update, Descalzi was quizzed on why Eni preferred reforestation to carbon capture and storage (CCS) or carbon capture, storage and utilization (CCUS). "Clearly natural sinks are less expensive than CCUS or CCS, with reforestation projects ranging between $11 and $15 per ton," he said, adding that "there is a commitment to buy the credits and then give back to the community between 10% and 40% relating to the gain made from the credits." Descalzi said Eni continues to work on CCS and CCUS in "different ways," but did not elaborate. Despite labeling decarbonization a "strategic priority," Eni has kicked down the road the bigger challenge of tackling Scope 3 emissions, which can be broadly defined as those created by using energy products like oil and gas (NE Jan.17'19). These far outweigh Scope 1 emissions: Descalzi said Eni's Scope 1 emissions total 42 million tons/yr and Scope 3 emissions 250 million tons/yr. Jay Eden, London

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