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Eni May Build Iraq Refinery to Capitalize on Domestic Demand

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Eni S.p.A. (E - Free Report) is in talks with OPEC member Iraq to build an oil refinery near the Zubair oilfield, which is located in southern Iraq, west of Basrah, per S&P Global Platts. The refinery is estimated to have a refining capacity of 300,000 barrels per day (bpd). The cost of the refinery is estimated at $4 billion, as stated by the country's oil minister.

In the first phase, the company will likely commission 150,000 bpd capacity by 2025. The refinery will provide Eni with a tremendous opportunity to process the nearby field production. The Zubair oilfield is expected to produce 700,000 bpd by 2027. Notably, Eni has a 41.56% operating stake at the Zubair oilfield. Its partners in the field include South Korea's Kogas and Iraqi state-run Basra Oil Company.

The local government wants the private sector to hold a 20% stake in the refinery project as it lacks resources to finance the same. The country imports significant amount of gasoline and diesel to meet fuel demand as the domestic refining capacity is not enough. As such, Eni will likely be able to tap into domestic refined products demand with the new refinery. The residues from the plant are expected to be exported.

Eni, based in Rome, Italy, is among the leading integrated energy players in the world. Its downstream business is involved in refining and marketing of petroleum products at retail and wholesale markets. Importantly, the company is strongly focused on upgrading and expanding refining plants. In the June quarter, Eni’s total refinery throughputs were recorded at 5.34 million tons, down 5% year over year. For the quarter, the Refining & Marketing and Chemicals segment reported an adjusted profit of €73 million, up 43% year over year on higher throughputs in the rest of Europe (excluding Italy).

Price Performance

Eni’s shares have declined 8.8% in the past three months compared with 13.7% fall of the industry it belongs to.

Zacks Rank and Stocks to Consider

Currently, the stock carries a Zacks Rank #3 (Hold). Some better-ranked players in the energy space include Royal Dutch Shell plc , Equinor ASA (EQNR - Free Report) and EOG Resources, Inc. (EOG - Free Report) , each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shell’s bottom line for 2021 is expected to jump 112.5% year over year.

Equinor’s bottom line for 2021 is expected to skyrocket 121.7% year over year.

EOG Resources’ sales for 2021 are expected to rise 18.8% year over year.

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Eni SpA (E) - free report >>

EOG Resources, Inc. (EOG) - free report >>

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