Paolo Scaroni - CEO, Eni HARDtalk

desperately needed. `` and medical supplies. Now it's

time for HARDtalk. Welcome to HARDtalk. His energy

Europe's economic Achilles heel? While the US benefits from a massive

investment in shale gas production, Europeans focus on decarbonising the

economy, while bickering about the relative merits of franking, nuclear

and renewable energy. My guest today is Paolo Scaroni, boss of one of

Europe's energy giants, Italian oil company Eni. How can you best

safeguard its energy future? `` can Europe.

Paolo Scaroni, welcome to HARDtalk. Thank you. You wrote the other day

in the Financial Times that Europe's energy strategy was in a

mess. Isn't the more particular point that your own company Eni, is

in a mess? Not really. Ali European strategy of course has some

problems. In particular gas and electricity. But the total Europe is

in a mess. We ended up being gas three times more than Americans and

electricity twice. How can we imagine a future for Europe as an

industrial power with such a differential price? This is the

question we have been asking to all our regulators and the public

opinion and of course our institutions. When you look at the

European economy which, for several years, has struggled to be globally

competitive, your view is that one of the elements of that lack of

competitiveness is energy? This is relatively new. This is the result

of the fracking in the US. The fact that the US in the last five years

has been capable of producing so much gas and lowering prices of gas

in the US is completely changing the scenario. Everybody who has to make

an energy intensive investment, rather than choosing Europe, will

necessarily choose the US. Just to give you an impressive number, last

year, every American household, as a result of the shale gas revolution,

saved $1200. That's a phenomenal number for a family. So, our

families are getting more poor and Ali industry is becoming less

competitive. `` Ali industry. This is the problem. I want to pick up on

that fundamental point about fracking, use of shale gas and

whether it offers opportunities for Europe in a moment. Before we get

there, let me come back to this point about Eni and your strategy.

One of the key problems you face today is that you took a strategic

decision over many years, in fact decades, to put a huge amount of

your focus and resources into Africa, and particularly North

Africa and Libya. And right now, that strategic decision is seriously

backfiring. Well, you are really talking about something which is

happening today. I am. In the last week or so. As boss of the company,

you have to accept that you face a crisis. Right now, the key gas

pipeline between Libya and Italy isn't operating. Your company is at

the heart of this crisis and right now it's hard to see how you will

get out of it. Let me give you my view about that. We are the biggest

producer in Africa and in particular in northern Africa. We have not lost

one barrel of production in Egypt so far, and we have not lost one barrel

in Algeria. The problem is around Libya. Libya is getting out from 42

years of dictatorship. It `` a dictatorship which, on purpose,

destroyed all Libyan institutions. Well, a dictatorship which you

consistently did deal with `` deals with. Happy knack you made a new 25

year strategic commitment to Libya in 2008. And now, with the benefit

of hindsight, that looks like an estate? Not really. Over that

agreement, we haven't spent any money, with the revolution came so

quickly. In fact, we didn't make any investment since 2008. This

agreement in 2008 was crucial to renew our concessions in Libya. And

I point out that Alp position in Libya has been even before Gaddafi.

`` our position. We have been there since the time of the monastery

there. Yes, we are worried about Libya today. Do you agree with your

own Foreign Minister who said the other day, Libya is absolutely out

of control? I would probably take a word, absolutely. Out of control.

It's a country which doesn't have an army. In which the police is very

weak, in which everybody has a weapon. And I am quite surprised

that there are not many casualties in Libya, because with this

situation it's quite surprising. The reality is that Libyans are

relatively passive people. But what are you going to do? There are

various militant groups who have taken over key institutions and have

effectively forced you to shut down the pipeline to Italy. Italy is

almost 25% reliant on Libyan oil. It also uses a huge amount of Libyan

gas. This is a crisis for your national economy and a crisis for

your company. I'm not really hearing that you've got any short`term

solution. But nothing of that... It's not a crisis for the Italian

economy. We will replace the oil from Libya easily. The gas, yes, it

is more complex. 12% of the Italian gas comes from Libya. But there is

so much gas around that I don't see any foreseeable future... At least

until we are talking about Libyan gas alone. We already have been

living through a window completely without Ruby and gas. Without major

problems. `` Libyan gas. There is a problem for Eni, of course, because

we are missing production there. Therefore, some income. But it's a

relatively small part of our production and we will find ways to

replace this production somewhere else. I'm surprised you sound so

blase about it. It's actually quite a significant part of your

production. Are you only now beginning to think you will have two

factor out Libya from your future business plans? That Libya may not

be part of your future? We are not reaching a conclusion at all. We

have been producing in Libya in 2013 roughly 62% of what we should have

been producing. Starting from the 1st of January up until now. Yes,

Libya represents roughly 12% of our production and we missed a portion

of that. Today, the situation is getting worse. I recognise that. But

I have reasons to be mystic. Libya remains a very huge country. `` to

be optimistic. I cannot believe that Libyans will not find a way to live

peacefully in a very rich country, which can be wait or another guitar.

So, it's a question of how long you can wait before there is stability

to allow you to resume your operations. `` Kuwait or Qatar. It

raises other strategic questions. You are the biggest fossil fuel

player in the whole of Africa. You have end a huge amount of your

company's future on Africa and yet you work in countries, Nigeria,

Mozambique, the Republic of Congo, which all, in different ways, off a

huge challenges to your company. Are you confident that you can meet

those challenges? We have met those challenges in the last 60 years. So,

I believe we should be able to meet those challenges in the future. We

have been in Nigeria, for example, since 1962, just to give you... In

Congo since 1968. So, we have become kind of part of the country. Which

is one of our strengths. You have also become the subject of great ``

consistent criticism, which is why I am asking. For example, in Nigeria,

the recent amnesty and `` Amnesty International report looked at two

of the biggest players in Nigeria, misrepresenting oil spills,

pollution, that your company is responsible for. They report that,

in 2012 there were a staggering 474 spills from your own company's

operations, 207 from Shell. Your company committed a great number of

spills to sabotage but provided absolutely no information to support

the allegation and Amnesty International concludes that number

of spills is indefensible from a responsible operator. Well, we

defend it very well. In no country in the world we have the amount of

spills that we have in Nigeria. A don't come from corrosion, otherwise

we would be the first ones to prepare the pipes, it was of course

we have an interest in repairing the pipes. The reality is that most of

these spills, the large majority, come from sabotage and theft, which

is not defined by us, it's by a commission made by the government,

one of our people in the community, which defines what is theft. So, in

total, we lose in Nigeria 30,000 barrels a day, which is dramatic.

And all of these 30,000 barrels a day are what we call barrels which

are... But you have been promising for years to take countermeasures

against this so`called bunkering. Technically it's a major issue. What

we can do is, through the pipelines, no sooner rather than later that

somebody is picking up our oil. And we are working on that to find a

technical solution, to know what's happening in real time. You better

hurry up because, as you know, the Nigerian parliament right now is

considering tougher laws that will punish companies such as yours for

these spills in a new way. There will be punitive fines and they

could be a `` they could shut down some of your operations. If you

don't improve your act in Nigeria, you are in big trouble. I hope the

Nigerian parliament will care more about bunkering in Nigeria. Keep

order in the Swans and avoid these criminal acts. You say the problem

is Nigeria's, even though you are making big rockets? You are not

prepared to take responsibility? Certainly the problem of bunkering,

the key problem in Nigeria, the reason why all major oil companies

are thinking about quitting Nigeria, is a Nigerian problem. We

can do nothing about bunkering. What we can do is when we have a theft,

which is taking place, knowing that this theft is taking place earlier

rather than later, but the problem of how to stop that is very much a

Nigerian problem. The thing is, for you to be a success in Africa, you

need to build confidence. You need African nations and the public to

trust you. Let's talk one other African issue. That is, your massive

project in the Republic of Congo. You have been talking about it for

years. To develop up to 1800 square miles off will fans inside Congo.

You say there could be anything from up to 200 million barrels of oil. ``

oil sands. How will you extract that? This heavy oil, what you are

talking about... In western Canada, which has raised so many

concerns... This has been postponed for the reason that we have been so

good in making new discoveries in the Congo, in particular the

Republic of Congo, that the government decided to postpone

this. That's off? You were talking with such confidence. The real

problem with Congo was the production was declining so rapidly,

the Republic was looking for new resources. We made two major

discoveries in the last 12 months. That made this project not any more

a priority. So it's not a priority. It is a priority is white, going

into the oil... Thousands of feet under the sea? This locally is very

much shallow water. With all of the concerned that we see in the Arctic

for the offshore drilling in various offshore finds. There is concerned

that your in Africa will not prioritise the environment in a way

that should be prioritised. The people around the world believe that

the coil companies have to prioritise.

As far as we are concerned, first of all, 95% of our activity in Africa

is not deep offshore, and is never high temperature. It has three

conditions. We are not in the same scenario. We have a track record of

probably being the safest company in the industry. We drilled 3000 Wales.

Without one blowout. It is a record for the profession. So in total, we

are very careful about this problem. Africa is not the place where this

problem should arise. In strategic terms, you are pouring more and more

resources into exploration in very rum at parts of Africa. `` remote.

You are also a very loud advocate of fracking. You sit as a European big

oil CEO, who has forgotten that Europe's E long`term commitment to

the energy sector is to decarbonise. As far as exploration is concerned,

we are very active in exploration and very successful. No other large

international company has been so successful as us. I understand that.

But justified that in terms of the context of Europe's commitment to

decarbonise. It is nothing to do with backing. It is conventional

oil, conventional gas, in particular Mozambique. It is very conventional

gas. Moving into Europe, the question I raise is not necessarily

a question... It is for Europe. How do they want to cope in such a

differential in energy price in Europe, and in particular the US?

Europe wants to continue its policy on energy, I have to tell you, the

European policy on energy has been wrong. Wrong, because in terms of

the subsidies to renewables, particularly German, Spanish, and

Italian consumers, they are paying a bill which is skyrocketing in terms

of cost. Security of Supply, it has been going down with renewables,

because people are stopping the gas`fired power station. There is no

economic reason to keep them. Renewables happened to produce

electricity when they want, not when we need it. I need to ask you the

fundamental point raised by the International energy agents, they

say that two thirds of current fossil fuel reserves need to stay in

the ground if there is to be any chance of avoiding catastrophic

global warming. As a representative of bit `` big oil, do you accent

that conclusion? I accept that we have to produce as less CO2 as

possible. Fossil fuel is also is, including some that you are actively

looking at, need to be left in the ground. In practical terms, what do

we have to do? We have to use in a conservative way, energy. We have to

use gas instead of coal when it is possible, simply because you produce

less CO2. We need to work on renewables because at the end of the

day, it will replace carbon when they are capable of doing that. But

those renewables have to be something that makes sense. But the

point is, this is the nub of the debate, you are sitting before me,

telling about your ambitious plans for all your exploration and gas

exploration in Africa, it seems to me that at some point, business

leaders have to say, no, we are not going to strive for more and more

exploitation of these fossil fuels. We are going to put our energy

elsewhere. That is what the world economy and the European economy do

Mans. First of all, before renewables, will take the place of

hydrocarbons, it will be in 50 years, a long time. Today renewables

represent in the world 1% of the consumption of energy. The road is

very long. This is about leadership. In the meanwhile, we have to give

the energy that people want a at competitive cost to make our economy

is competitive. In the meanwhile, renewables will solve the two major

problems they had. The first, they are very expensive and the second is

that they are intermittent. Until we do not find a way to store energy

effectively, renewables RA very slow solution. The political climate is

to strive for these ambitious long`term carbon reduction targets.

That is the context in which you work. The other context is energy

security. You recently argued that Europe should be striving for a

closer energy relationship