管理層發言
Good afternoon, ladies and gentlemen, and welcome to Eni's 2026 First Half Results Conference Call, hosted by Mr. Claudio Descalzi, Chief Executive Officer. I am now handing you over to your host to begin today's conference. Thank you.
Thank you. Good morning. Good afternoon and thank you for being with us today. Our second quarter and first half results clearly reflect our successful execution of the strategy and the objectives we have consistently communicated. In Q2, Eni generated EUR 5.4 billion pro forma EBIT and EUR 2.3 billion net income, both doubling year-on-year, and EUR 4.5 billion of cash flow from operations, up over 60%. This growth significantly outpaced the increase in Brent prices over the same period, demonstrating the strength of our operating leverage and our ability to absorb a highly unfavorable foreign exchange environment. Looking at the first half of the year, we delivered a remarkable 40% year-on-year increase in pro forma EBIT. Reported gearing remained stable quarter-on-quarter, while pro forma gearing declined to 10%, reaching the lower end of our target range. Overall, this performance reflects excellent operational execution, effective capture of market opportunities and the continued delivery of our consistent strategy. The first half of 2026, marked by the emergence of a new crisis in the Gulf, has once again exposed our industry to extraordinary volatility, yet Eni has demonstrated its ability to effectively mitigate external pressures. Our resilience is underpinned by broad geographic diversification, strong operational efficiency and the deployment of proprietary technologies. At the same time, our robust organic growth continues to be fueled by our outstanding exploration success and a deep pipeline of development opportunities. Most importantly, our growth is increasingly multidimensional. While exploration and production remains our highly competitive core business, we are rapidly scaling attractive growth platforms right across the energy value chain. Specifically, I would like to highlight three key pillars of our strategy. First, diversification. We are well diversified across geographies, businesses and technologies. While some of our operations have been affected by events in the Middle East, the overall impact has not been material. Actions taken in 2026 have further strengthened this diversification, increasing our exposure to Asia and South America, expanding our transition-related businesses and opening new opportunities in trading activities, critical minerals and stationary batteries. Second, growth. We continue to deliver a unique double engine of growth, combining industry-leading organic upstream production with a rapid parallel expansion in low-carbon energy. Third, financial performance. We continue to generate outstanding financial results with over 60% of our original plan targets already met year-to-date, also thanks to the fast time to market of our projects. Our satellite model, increasingly acknowledged as a material positive differentiator for Eni, continues to de-risk the balance sheet, attracting third-party capital to fund our expansion across new technologies and geographies. Turning to Upstream. We delivered an outstanding 8% year-on-year reported production growth. In the first half of the year or 11% underlying, we fully offset Middle East volume losses, thanks to the efficient execution of major operated projects, including Agogo in Angola, Amoca in Mexico, Congo LNG Phase 2 as well as a strong contribution from Vår Energi. This growth is entirely organic and reflects investment and exploration successes achieved over several years. As discussed during Q1, our unique 2026 exploration performance has added over 1 billion barrels of new resources supported by credible development pathways. This success is driven by key discoveries, including Algaita-01 in Angola, Murene South-1 in Côte d'Ivoire, two offshore gas discoveries near Bahr Essalam in Libya, the Deniz discovery offshore Egypt and the Giant Geliga-1 gas condensate discovery in Indonesia. We have further refreshed our future pipeline with new acreage positions in Uruguay, Timor-Leste and Gambia. Furthermore, to secure our medium-term production capacity during the plan period, we have sanctioned three major projects: Baleine Phase 3 in Côte d'Ivoire, Geng North in Indonesia and Cronos in Cyprus. Beyond these projects, we are shaping our global footprint through the buildout of two diversified regional clusters. In Asia, the Searah business combination completed in June created our largest satellite platform to date and established a leading player in the Pacific region. Initial production exceeded expectations, surpassing 300,000 barrels per day and backed by a 3 billion barrel reserves upside. It has a clear path to approach 800,000 barrels per day by 2030. In the Americas, we continue to advance significant opportunities in Argentina and Venezuela, which together with our existing position in Mexico and the United States, represent an increasingly important component of our upstream portfolio. In detail, in Venezuela, we are finalizing a negotiation for new contracts for Junin-5 and Corocoro. Simultaneously, we have finalized the gas export agreement for the Giant Perla field. Collectively, our footprint in Venezuela unlocks an outstanding growth potential of more than 5.5 billion barrels of recoverable resources. Meanwhile, in Argentina, our newly consolidated asset of an exceptional 25 Tcf of gas, equivalent to 4.3 billion barrels of recoverable resources plus an additional 500 million barrels of condensate, brings total gross recoverable resources in the country to 4.8 billion barrels. The new material initiatives in Argentina, Venezuela, East Asia, together with our African portfolio, provide absolute confidence in our long-term trajectory. As a result, we now expect production growth to be around 4% CAGR guidance through 2030, while we are also developing a unique visibility on a further wave of growth opportunities beyond 2030. Importantly, through portfolio high-grading and strategic moves like our recently announced Mercuria joint venture, this volume growth will translate directly into cash flow, underpinning our primary target: growing our upstream free cash flow per barrel by more than 50% by 2030. Our Q2 results demonstrate Eni's ability both to capture favorable market conditions and to enhance underlying profitability. E&P delivered outstanding production growth and successfully captured the benefits of the market environment with particularly strong contributions from Norway and Congo. GGP generated pro forma EBIT of EUR 0.47 billion, confirming better-than-expected performance and supporting a further increase in our EBIT guidance to over EUR 1.4 billion. We also see additional upside potential in the second half, supported by current pricing conditions and inventory replenishment dynamics. Plenitude and Enilive together generated EUR 670 million pro forma EBITDA in the quarter and EUR 1.13 billion in the first half, supporting an increase in full year guidance to EUR 2.6 billion compared with the original EUR 2.4 billion. Within transformation businesses, refinery utilization recovered following the major turnaround activities completed during the first half. Versalis also continued to reduce losses in line with the improvement plan, also supported by better market conditions. Contribution from associates benefited from supportive macroeconomic conditions and the consolidation of Searah from June onwards. The first half tax rate of approximately 39% was below our full year guidance, reflecting the impact of high-grading upstream production, the accounting impact of satellite, the transition toward a more sustainable, diversified overall income mix and the benefit of our restructuring and performance improvement initiatives. Cash flow from operations remained strong, supported by dividend contribution from associates and continued working capital improvement. Operational working capital generated a positive contribution in the quarter, and we continue to expect an overall reduction throughout 2026. Capital expenditure amounted to EUR 1.8 billion in Q2, and we continue to expect approximately EUR 7 billion of gross CapEx for the full year, while we also reduced the net figure to below EUR 5 billion. We paid the fourth and final quarterly dividend related to 2025 and repurchased EUR 600 million of shares. Since 2021 outstanding shares have been reduced by around 18%. In light of the raised guidance for CFFO to EUR 15 billion, we now expect to repurchase EUR 3.4 billion of shares in the 2026 program, representing a combined yield to our investors of around 10%. Pro forma gearing at the quarter end remained at 10%, the lower end of our target range, and we expect reported gearing to converge toward that level by year-end. In conclusion, the combination of our upstream positioning and growth outlook, our integration across the entire energy value chain, the increasing value creation from our transition businesses and our strong financial foundations position us competitively in a world that has entered a new energy paradigm. This is confirmed by the revised guidance for most of our businesses that translate into an increased distribution. Underlying oil and gas production growth is now seen exceeding 5% above the upper end of the previous range. GGP pro forma EBIT is raised to over EUR 1.4 billion, plus 40% compared with the initial level. Enilive pro forma adjusted EBITDA is revised up by 18% at EUR 1.3 billion. And at a revised scenario of $85 per barrel Brent, adjusted CFFO is expected at EUR 15 billion, determining a higher buyback of EUR 3.4 billion. The new buyback represents a 127% increase over the initial guidance of EUR 1.5 billion at the budgeted cash flow. The potential special dividend related to oil price above $90 per barrel or gas price and SR margin more than 50% of the original budget assumptions will be determined in the last quarter. In this environment, Eni is in one of the strongest positions in its history. That concludes my remarks. And together with my colleagues from the Eni management team, I'm ready to take your questions.
I now leave the floor to Mr. Jon Rigby for the Q&A session.
We'll start with Alejandro Vigil at Santander. Alex?
分析師問答
The first question is about the guidance about production. Definitely, this year looks very strong also with the Searah consolidation. If you can give us some numbers about the outlook of 2030 of production, just to have some indication of the range of potential volumes that year. And the second question is about the European natural gas market. You mentioned that in the guidance for global gas and LNG, you are not including any upside from the current situation. If you can elaborate about how you see the second half of the year.
Thank you. For production outlook, I think I—Guido will take over for the question and if he's okay. Is Cristian there to give you an update on the gas in the second half, as you asked?
Yes. So on production, of course, you noticed that we have improved our guidance in 2026. Originally, we provided a range of 3% to 4% growth underlying, which now we increased to 5%, and this is coming from a higher contribution from some countries like Libya, Mexico, Kazakhstan, and of course, the anticipation of the business combination in Searah. For 2030, we have also provided a stronger support to our originally provided guidance. You have noticed that we have accelerated some major FIDs. We have included some projects which initially were beyond 2030 that we have now anticipated to the 2030 plan.
So just to give some more color on our production. If we look at all the projects in our slide, we have 54 projects that are coming from our organic growth; our exploration is clear, and there is something that is coming from the exploration we performed in the last 10 years. Most of these projects are already very advanced—some we took the FID, some are really in execution, but most of them have the POD completed. So that is going to give that 4% we said by 2030 and is going to confirm a solid growth also after 2030.
When it comes to the gas market scenario for the second half, our scenario is currently in line with the forward curves, as you can see. But the situation is fairly fragile given the geopolitical situation and the delay in the replenishment of European storage. Depending clearly on the evolution of the situation, we can see upside potential in terms of volatility and higher flat price numbers for the second half. We are ready, with our assets, to take advantage of that situation.
Thanks, Alex. We're going to now move on to Biraj Borkhataria of RBC. Biraj, are you there?
The first one is just on Venezuela, which you touched on in your initial remarks. There were some reports recently that the government had presented new terms to the industry. I'm just wondering if you thought those were sufficient to drive investment beyond 2027 and 2028 and as we see more on the oil side than the gas side. And then the second question is just on refining. The strength in the downstream has been a big theme this quarter. I know you don't have a huge amount of exposure to this, but I just noticed your indicator was down quarter-on-quarter. I guess we're looking at the cracks on the screen, which are very strong. So could you just help me understand why you're not able to take advantage of that and how we should think about that going to the second half?
So Venezuela—maybe Guido can complement what I'm going to say. Venezuela, we are in negotiation: very open, clear and transparent and very good negotiation. We are discussing very well with the minister and with PDVSA, clearly also with our American partners. We have a big potential: as we said, we have one of the best blocks in Junin-5. We have Corocoro. We have Perla for which we already signed a contract that has been very quick a couple of months ago; we signed a contract for export. That is very good because it's going to complement our domestic production and that gives more breath and more space for future investment. As you know, we already developed most of the infrastructure for the second phase, so we can really go fast for the second phase and then put in place a floating LNG for export. So up to now, Venezuela is responding very well. Clearly, we are going to negotiate a contract that allows us to make investments. We have to remember the history of this country; it's not that we forget what we have in the past. So we are prudent. But I think that what happened until now is encouraging us to go ahead with our Venezuelan partner PDVSA and the minister. Just to talk about terms, I'd like Francesco to say something about terms and then if there is anything to add for Venezuela or in general for downstream, also Pino can add something and Stefano Ballista, if there is something for the biofuel refineries.
About our benchmark refining margin, clearly this benchmark is a nominal value representing a normalized status of the market. It takes account of the crudes that are generally imported in our refineries, taking into account the freight costs normally assumed for this transportation and logistics. The situation we faced since March is completely out of norm. The term you can read in a generic way is not the actual margin that we are able to capture because there are some discounting factors: mainly higher freight costs, higher logistic costs, differentials of crudes that are not matching the original crudes that were included in the formula, different yields. Also there are some hedging factors that weighed because we covered a small portion of the throughput during the quarter when we took advantage of the scenario. Clearly, the spike that occurred in the last month is so material that it has limited this opportunity. In general, what you read as an average on a nominal term, to be converted into our actual figure, will be with a discount of about $2 to $3 per barrel.
The fundamental point is that we have completed all the turnarounds in the first and second quarter, so we are able to maintain maximum capacity in the third quarter. That means with this current margin, a lot of upside.
If I may, I'd like to complement with some operational information. On the gas business in Venezuela, as you know, in March we signed a sustainability agreement on Cardon IV. PDVSA is honoring this agreement, so it's providing cargoes to pay the current gas invoices. On the other hand, we are preparing the plan of development for Perla to export gas and the filing of this POD is imminent. On the oil business, as Claudio said, we are at the very final stage of negotiation, and we have also prepared ourselves, and we are ready to mobilize as soon as we sign this contract the rigs to exploit the resources and make use of the spare capacity that the facilities in Venezuela have to increase production, of course.
We're now going to move to Josh Stone at UBS. Josh.
Two questions, please. Firstly, on CapEx, and thanks for the project list on Slide 6, it's useful. If I understand correctly, you want to develop these new projects without increasing spending. So it sort of brings up the question of which projects are falling off the list? I noticed in the release there was some impairment related to a slowdown in more marginal fields. So maybe anything around which fields are more marginal, which geographies are more marginal to make room for these new projects would be useful. And then second question on chemicals. The losses clearly narrowed this quarter, but you're still losing money. Maybe just talk about the trends of earnings, what you're seeing for margins in chemicals and how much of the improvement could be attributed to the self-help versus the wider macro?
So for CapEx, it's true: we are growing and we demonstrated in the last couple of years that we are growing without increasing CapEx. That comes from at least two factors. One: we are very effective and efficient in developing fields. In the last large projects we developed, we respected both timing and budget. We never exceeded our budget. That is critical in upstream, especially when you develop deep offshore or floating LNG. Secondly, we created a different economic model—the satellite model—through which we deconsolidate and through growth and value components they can justify their investments without really creating additional burden on our balance sheet. That allows us to go faster and keep a very clean, light balance sheet that allows us to expand or increase our remuneration policy, which is our priority and what we demonstrated in the last couple of years. It's not a question of deleting or writing off marginal fields. We do not typically write off marginal fields. We farm out through an M&A process that was very successful and generated good income. Those are the two principal reasons. I'll pass the floor to Adriano to talk about chemicals and the trends.
Josh, thanks for the question. As you described, the result in chemicals is improving quarter-over-quarter. In the second quarter compared to the same quarter of last year, we have seen a major improvement in the range of three-digit percentage year-on-year. We need to distinguish between what is transformation and what is scenario. In terms of transformation, we are performing in line with what we said to the market: on a yearly basis we expect in the ballpark of EUR 250 million improvement. Right now, the trajectory of result of the transformation is a little above this target—around EUR 280 million to EUR 300 million. Part is also scenario. We have seen an improvement in scenario in the second half. Consider the net impact of the scenario because we are energy- and feedstock-intensive, so increases in feedstock energy are higher costs for us, but we have also seen shortages in the market, not increases in demand. This was due to about six to eight weeks when, due to the Hormuz closure, we did not see imports from the Middle East. After that period, we saw an increase of imports from the U.S. So the flows were replaced and we are now back to the starting point. In the second quarter we have seen an improvement of the scenario. Looking forward, we expect to continue to improve performance due to transformation. On a yearly basis for coming years, roughly 50% of the improvement is transformation and 50% is new platforms.
Thanks, Josh. We're now going to move to Alessandro Pozzi at Mediobanca. Alessandro?
The first one, for Claudio. Going back to production, of course, you have a lot of production coming through to 2030. But if you add all the other opportunities that you have in Cyprus, additional upside in Indonesia, Argentina, Venezuela, it looks like the potential for underlying growth is very large even beyond 2030. Putting disposals aside, what could be the potential underlying growth of the portfolio that you have today looking into the middle of next decade? And the second one, follow-on on disposals. Can you give us an update on the disposals that you expect in the upstream, maybe Indonesia as well—there's a bit more to be sold there—and also on the scope of the agreement with Ares in the upstream?
Thank you for your question. Next year we are going to have an update. What we said is the expectation up to 2030 is 4% growth. After 2030, it may be better for sure. I don't think there is another company that has more than 54 projects for startup that are really organic with very low cost. We are in many different countries—some 13 or 14—so diversification is a key word. That means we don't have all the eggs in the same basket. Each country is very rich in terms of future growth. We are in a good position. We are in a world that needs energy: demographics, hyperscale data centers, AI and industry growth are leading to more energy demand. We are well placed to give an answer to this. I don't think we've ever been so strong in terms of number of projects and geographies. Disposal—I will give the floor to Francesco to talk about the status of our disposals.
Clearly, the plan for this year is almost completed. As you mentioned, we are in an advanced stage for the last step which is the Indonesia 10%, which has already entered the final stage. We have completed a number of deals that are pending closing. We have done the Nigeria onshore disposal. We are running the increase of capital in Plenitude with consequences in terms of the balance sheet. We announced the infrastructure deal. There are various activities. For the coming years, we will continue to maximize the valorization of our portfolio. Our portfolio is a living animal: it gains value through exploration, business development and business combinations. This means there will be opportunities to valorize parts of it to reduce exposure to areas or regions that are no longer core, and to improve valuation of our transformation business. We proved last year that we still have new ideas to put on the table and this will continue in the coming years but will be part of the next four-year plan.
And what is the perimeter of the infrastructure deal?
The infrastructure deal is a partnership working on a generic portfolio. It's not a specific set of assets. Upstream business has many kinds of infrastructures. The idea is not to identify a specific geography or field, but to describe a broader portfolio and create a financial synthetic element that simulates the cash flow related to that infrastructure. This is a way to extract more value from infrastructure that has a fixed return, while we would like to invest in double-digit, high double-digit return on our upstream assets.
Thanks, Alessandro. We're going to move to Ahmed Ben Salem at ODDO. Are you there?
You mentioned the possible extraordinary dividend review in Q3. What would trigger that decision? And if cash flow remains strong, would buyback still be your preferred way of returning excess cash to shareholders?
We have set the rules for the excess dividend. If we assume a full year $90 Brent scenario—currently we are at $91—so we are in the money for the excess dividend distribution. If we assume a 50% increase of refining margin, that $9 is the trigger and we are well above that number. We also assume a 50% increase on the EUR 36 MWh budget for TTF which would bring it to EUR 54. We will be above EUR 54 on average. Currently, we are probably in the range of EUR 47 to EUR 48. So there will be an extra dividend. We will see in September how the market evolves, our expectations for the end of the year and how the company has performed in terms of cash generation.
Yes, to specify: in October we have to take the decision. We're going to pay the extra dividend in the fourth quarter, so by December. Just to remember what is going to happen.
Another element: if we are in a situation where there is an extra dividend, there is probably also an extra buyback, because if we enter a higher price environment there will be a ceiling up to EUR 4 billion, but we are currently at EUR 3.4 billion. We may saturate the 60% cash flow from operations distribution up to that limit.
Great. Thanks, Francesco. We're going to move to Michele Della Vigna at Goldman Sachs. Michele?
Firstly, congratulations on the strong results. Two questions. First, do you have any comments on the situation in Kazakhstan around the enforcement of this $5 billion environmental fine? And secondly, could you shed a bit more light on this Mercuria - Eni Global Trading joint venture? What do you expect it could contribute in the coming years and whether effectively GGP becomes part of the joint venture?
Okay. I think for both Kazakhstan and Mercuria, Guido will answer and maybe I can add something.
On the arbitration and ongoing situation: first, let me clarify that the operator and all the shareholders conducted operations in compliance with the law of Kazakhstan. NCOC had all the permits required. However, the Republic of Kazakhstan, through various instrumentalities and agencies, continues to pursue this sulfur fine and has commenced some enforcement steps. There is a commercial arbitration under the PSA which is ongoing, and there was a restraining order from an international tribunal prohibiting the Republic from taking any measure to enforce the fine during the arbitration. The operator is continuing to challenge this sulfur fine, including an investment treaty arbitration, which is currently ongoing. The situation is ongoing: they made some steps but at the moment enforcement measures are on hold. Regarding the trading JV: this is part of our transformation of the trading business. Trading initially served the corporation; then it became more of a marketplace player within the company; the last step was to merge with a pure trader to combine the best of both worlds: the diversified set of industrial assets and structured supply portfolio of a corporate like Eni with the operational flexibility and systems of a pure player. It is a 50-50 JV, and we expect in the long term that this JV and the trading activity will help raise our ROACE by one or two percentage points, and improve cash flow per barrel and the overall results of the company.
Thanks, Michele. We're going to now move to Fergus Neve at Rothschild & Redburn. Fergus?
Two questions, please. First on Enilive, where the results were particularly strong this quarter and it was great to see that feed through to the guidance upgrade. Could you give color on the relative split of the results between the marketing business and the biofuels business this quarter and perhaps also comment on how your biofuel margins have been looking so far in 3Q? Secondly, on refining: the assumption in the scenario for the second half has stepped up quite a bit for the overall number in the full year. Could you give color on where the adjusted margin has been tracking so far in July and perhaps thoughts on how much of an uplift that might give to the business in H2?
Okay. The first question for Stefano and the second one for Pino—Stefano and Pino as well.
Yes, the quarter has been very strong and the result was driven by a step-up in biorefinery performance. In terms of overall result, out of the roughly EUR 375 million adjusted EBITDA, about 35% to 40% contribution came from the biorefinery. This was driven by both scenario improvement and a very strong performance from the assets. Looking at available assets—Chalmette and Gela—overall utilization in this quarter was above 90%. We implemented several optimization levers to extract value. Moving forward, the situation should continue to be supportive. Demand for 2026 is foreseen at around 20 million tonnes compared with 16 million in 2025. This is driven by the rollout of new regulation in Europe with the Renewable Energy Directive: Spain recently confirmed a move from energy content to GHG reduction and banned double counting. In the U.S., we got in April confirmation on the new target from the EPA. Also, flows from U.S. to Europe are dropping. This is another signal supporting the market moving forward.
About July: what we are seeing now in July are very high levels—above $30 per barrel in terms of crack spreads. That should remain very bullish in the next month because of a combination of factors: low product stocks, low refining capacity in operation and the driving season. The crack spreads we are seeing in gas oil and gasoline are very high, and there is also some premium to import product. We expect a very bullish period in the next month and we are positioned to benefit, because we are anticipating the shutdowns of Sannazzaro and Milazzo refineries. The Taranto refinery has planned shutdown for maintenance in September, but we are moving this shutdown for a couple of months to capture the period.
Very good. Thanks, Pino. We're now going to move to Paul Redman of BNP Paribas. Paul?
I had one question on strategy around the 320 service stations you recently acquired in Europe. I want to understand the strategic rationale for buying fuel stations today, and what the impact could be on earnings from the deal? And secondly, you guide to an underlying improvement in your cash flow from operations of EUR 700 million this year. What are the key drivers of that underlying improvement?
About the acquisition in Central Europe, mainly Germany and Denmark: this is part of a strategy to expand our Enilive marketing activity. Enilive already has exposure to marketing in Germany. This was a good opportunity to buy a second-tier brand that we can improve via our branding, adding shopping and convenience stores and benefiting from local logistics support from our participation in German refineries. The asset is generating in the range of EUR 40 million to EUR 50 million of EBITDA. Regarding the cash flow from operations improvement, the EUR 700 million underlying improvement is related to the elements we mentioned during this conference: production growth, upstream production growth, cash flow per barrel improvement related to that growth, opportunities and growth generated by GGP and Enilive benefiting from scenario and availability improvements. All these elements are major contributors to the revised cash flow guidance.
Thanks, Paul. We're going to now move to Naisheng Cui at Barclays. Naisheng?
Two questions, please. First on downstream: both Enilive and Plenitude continue to improve profitability and outlook has improved. Does this change your view or your partners' strategic view over those businesses? Second, on upstream: you have a very busy upstream growth pipeline of 54 organic growth projects. Could you talk about what Eni has done right to progress them in time and under budget? Are you worried about future CapEx cost inflation?
On the view about Enilive and Plenitude: I think these businesses confirm the model we created: we put together renewable content and transition content plus retail, i.e., marketing. This reinforced the possibility to navigate through cycles. Through the combination of these two elements, we can manage ups and downs. We have a strong balance sheet in each of them and can use cash generation from retail to supply the growth of the renewable side. This confirms what we set up in the last four to five years and the partnerships that recognize their value. It also supports the potential for IPOs, which remain the final goal for each of them.
On our pipeline of projects: we proved in the past we have been able to manage projects within cost and schedule. Last year we started up five major projects, so we demonstrated the ability to handle a large number. Our fast-track model is designed to run parallel activities and to have a high degree of on-hand features. We have an engineering company integrated in the corporation which is helpful. Regarding inflation: inflation was in the 3% to 4% range from 2025 to 2026, and after the Middle East conflicts it is more likely in the 4% to 6% range due to fuel costs and market dislocation. To ensure cost discipline and schedule reliability, on top of the fast-track model we have an integrated procurement strategy that allowed us to expand the supply chain into new frontier markets, strengthen strategic partnerships through master framework agreements and apply refined tendering approaches. Consider that most contracts for these projects were already locked before the Middle East crisis.
I want to add that strategically we built the company to be able to control projects. Fifteen years ago, while many were outsourcing, we in-sourced: we created an engineering company, specialized in exploration and development, and became the main contractor in many packages. To contain cost you must have the skills to control your activities. If you build your company to control each step, you can control costs. When we presented this strategy 15–16 years ago, people were surprised because it was against the trend, but now it positions us to not just find resources but develop them efficiently and deliver guidance to contractors.
Thanks. I'm conscious I said we'd close at the top of the hour, but I'm going to take my contingency and go to 3:10. We may not get to everybody asking questions. I apologize for that—please follow up later. We're now going to move to Henry Tarr at Berenberg. Henry?
I have two. One: you have several projects underway currently in the UAE and in Qatar. Is there any indication so far of the impact of the Hormuz disruption on these projects, following on from the cost question? Secondly, the sites in transformation costs have been running at around EUR 50 million a quarter through the first half. Is that a sensible indication for the second half?
On the first one, the answer is very short: there's no impact on the projects. Most of the activity, manpower and material were already in country and so progress is continuing. This is both in Qatar and in UAE.
About the sites in transformation, EUR 50 million a quarter is a steady trend at the moment. We expect them to decline in the coming years as we reduce the amount of transformation activity.
Thanks, Henry. We're going to move now to Alastair Syme at Citigroup. Alastair?
Can I return to the question on Venezuela? Can you give some clue about the way you're looking to protect your investment? There's a big potential but also big investment. Is it a service agreement or a PSC? What sort of fiscal structure is it? Second question on Fusion: you signed the Fusion fuels agreement in the U.K. You have CFS starting up in Boston next year. Can you talk about what you think the next couple of years in Fusion looks like? Should we be getting very excited about it?
For Venezuela, this isn't a standard old-style contract; it's more likely a PSC-type structure, but Junin-5 is the main topic. Perla is already exportable. Corocoro can contribute, but the big contributor is the field with almost 5 to 6 billion gross recoverable resources. The field is relatively shallow—around 1,000 feet—so drilling is fast and recovery is quicker than a large long-term upstream project. The structure gives protection because recovery is faster and CAPEX exposure is different: more operational expenditure and faster payback rather than long-term sunk capital. We are not going to invest with old-style contracts. The E&P project structure provides protection from CAPEX exposure. Lorenzo will give an update on Fusion.
Thank you, Claudio. For CFS, activity is going very well. We are at the final stage of construction and physically assembling the machine—more than 75% complete. We are confident that in early 2028 the machine will be ready and we will start commissioning to reach a Q greater than 1. Concerning the UK activity, we have signed an agreement with the UKAEA to build a machine plant to treat tritium—we are about 30% advanced. Recently, we created a private company called RH3OVA with the aim to commercialize these technologies and become an industrial opportunity. Activities are progressing very well.
Thanks, Lorenzo. We're going to take the last as we may be tight on time, which will be to Matt Lofting at JPMorgan. Matt?
Congratulations on a strong update this morning. I wanted to ask about Latin America as a portfolio hub. You talked about Venezuela earlier. When you look at the continent as a whole, it looks like it's becoming increasingly important to the diversification strategy and growth profile. Can you expand on the extent to which that's becoming more significant to Eni as you look forward to 2030-plus and how you think about structuring investments there to optimize paybacks?
As we said in the capital markets update in March, if you look at the production distribution at 2030, South America will play a significant role in our share of production, mainly from Argentina and Venezuela, but also Mexico. In Mexico we run at about 95,000 barrels of oil equivalent per day and we are the largest international producer. In Venezuela we described the features: Junin-5 and Perla. In Argentina we are talking about a world-class basin: 25 Tcf with 500 million barrels of condensate, which makes 4.8 billion barrels of oil equivalent recoverable. We have an estimated peak production at around 550,000 boe/d, of which 200,000 are liquids and the remaining is gas for LNG export. This inventory concerns reserves already discovered and to be developed. We are expanding our exploration portfolio: we acquired blocks in Uruguay which is a promising basin and we will update you soon on plans in Uruguay. On the financial structure: in Argentina we are in partnership with YPF and XRG; this will be an incorporated venture that will manage the value chain from upstream to midstream up to export on an equity-like basis with international shareholders.
To add perspective: the energy race means we must increase production and find energy. The situation is different from 10 years ago. There is no single country we can rely on to buy energy in the future; you must explore, develop and bring production online. Diversification is not enough—you must work the entire value chain from exploration through development and production. That is the paradigm shift. Eni is positioned to do that.
Thank you, Matt, for that question. I'm going to wrap the Q&A up right now. Again, apologies to those who weren't able to ask a question—please follow up with the Investor Relations team. Good luck for the rest of the reporting season, enjoy a nice holiday period, and we look forward to seeing you in September. Bye.