The potential of Africa for oil and gas producers is no secret. Energy production across the continent is forecast to grow by 40 percent by 2030. But it is not a market for the faint-hearted; infrastructure problems, social and political unrest and, most recently, the Arab Spring uprising in North Africa, makes the continent one of the most unpredictable and challenging in the world.

Anyone searching for guidance on what to expect from the oil and gas sector in Africa could do no better than look to Italy’s eni, currently the biggest foreign producer on the continent. It is also one of the longest serving multinationals in the region. eni has had a presence in Africa since 1954 and currently employs over 8,000 people there. At the end of 2013 it announced plans to invest US$28 billion in Africa over the next four years, including 140 new wells and major projects in deep water Nigeria, Ghana and Mozambique.

eni has a significant interest in Africa, which accounts for around 60 percent of its total worldwide production. In other words, anything that affects production in Africa affects the group as a whole, as Claudio Descalzi, Chief Operating Officer of eni’s E&P division, will attest. “We’ve been in Africa for 60 years, and this isn’t the first time that we have faced problems,” he says. “It’s not just happening to us, but everybody.”

The problem, in this instance, has been political unrest in two of its primary markets. In 2013 eni cut its production targets, mainly as a result of shrinking volumes from Libya and Nigeria. The group produces 650,000 barrels a day, and between a third and a quarter of that is produced in Libya. Throughout 2013 protestors began blockading oil facilities in the country in a bid to lend weight to their constitutional demands, resulting in a fall in Libya’s oil exports to less than 10 percent of their total. At one stage eni was producing 130,000 barrels a day from Libya, a loss of around 150,000 barrels a day against its potential The problem, in this instance, has been political unrest in two of its primary markets. In 2013 eni cut its production targets, mainly as a result of shrinking volumes from Libya and Nigeria. The group produces 650,000 barrels a day, and between a third and a quarter of that is produced in Libya. Throughout 2013 protestors began blockading oil facilities in the country in a bid to lend weight to their constitutional demands, resulting in a fall in Libya’s oil exports to less than 10 percent of their total. At one stage eni was producing 130,000 barrels a day from Libya, a loss of around 150,000 barrels a day against its potential The problem, in this instance, has been political unrest in two of its primary markets. In 2013 eni cut its production targets, mainly as a result of shrinking volumes from Libya and Nigeria. The group produces 650,000 barrels a day, and between a third and a quarter of that is produced in Libya. Throughout 2013 protestors began blockading oil facilities in the country in a bid to lend weight to their constitutional demands, resulting in a fall in Libya’s oil exports to less than 10 percent of their total. At one stage eni was producing 130,000 barrels a day from Libya, a loss of around 150,000 barrels a day against its potential production target.

“The main issue was not any technical problem but political unrest, particularly onshore,” says Descalzi. “We didn’t experience any security problems – our equipment and people are quite safe – it was a question of our production being shut down.” At the time of speaking, production had recovered to 240,000 barrels a day, but Descalzi estimates that lost production across Nigeria and Libya still amounts to about 8 percent of the group’s total capacity.

Such disruption has almost become a fact of life. eni’s solution is careful diplomacy, and a hefty dose of patience. “We have dialogue and discussion, and then we start again,” says Descalzi. “I think that will be the outlook for the next couple of years. It’s clear that these countries need these resources, so sooner or later we have to make an agreement to go ahead, it’s just a matter of time.”

Making close connections at every local level is an important element of eni’s success. Descalzi recently met with the Iranian oil minister whom he knows well: “I found him very proactive and very positive about what we have done,” he says. “We’ve developed two very difficult fields in Iran, one very close to the Iraq border. At the time, we produced significantly more than we had anticipated. We had a target of 30,000 barrels a day and we produced 160,000 barrels, so it was a wonderful project for the Iranians.” But the work to build relationships and trust does not stop with governments. eni is committed to sustainability in the markets in which it operates and in 2012 spent €28 million on local projects in Africa, predominantly in the Sub-Saharan region. Its future plans include electrification projects in Congo and Nigeria and a project to improve Africans’ access to healthcare.

Diversification, within Africa and elsewhere, also helps to spread risk. It is hoped that offshore production in Nigeria will help to compensate for some of the loss in onshore production, and Descalzi points out that eni has significant operations in other regions. “We are in more than 45 countries,” he says. “We are in north Europe, the US, South America, China, Vietnam, Pakistan and Kazakhstan. Diversification is a protection, but I’m quite optimistic about Africa.”

More recently, oil and gas companies in Africa have faced what could be seen as an additional threat, with the prospect of competition from Chinese rivals. So far, Descalzi does not believe that Chinese companies have the edge over their western counterparts, pointing out that “it’s not easy” to enter the African oil and gas market because of the amount of capital, skills and technology involved. “It’s so complex, it’s a natural protection. You must be very well prepared to compete in E&P,” he says. “There are some very good Chinese companies that are working very well in Africa, but they don’t have a major share at the moment.”

The basic secret of E&P success, he says, is to keep it simple and lean, and that is as true in Africa as it is anywhere else. “The main challenge for big companies is to keep their expenditure under control, and really go back to the basics and work on exploration,” he says. “The real value is to discover your resource and develop it; it’s not to buy it.”

Claudio Descalzi,

Chief Operating Officer, eni

Claudio has been COO of eni’s E&P Division since July 2008. He is currently President of Assomineraria and Vice President of Confindustria Energy. He was born in Milan in 1955. In 1979 he graduated in Physics at the Politecnico di Milano. He joined eni in 1981 as Oil & Gas Field Petroleum Engineering and Project Manager, for the development of North Sea, Libya, Nigeria and Congo. In 1990 he was appointed Head of Reservoir and Operating Activities for Italy. In 1994 he was named Managing Director of eni’s subsidiary in Congo and in 1998 Vice Chairman and Managing Director of the Nigerian Agip Oil Company, another subsidiary of eni.