Eni's Sustainability Programme in the Congo
Describe the different strategies used by multinational oil companies for accessing oil reserves around the world after World War II. What role does Corporate Social Responsibility play in Eni's strategy, and with what groups within the Republic of Congo does Eni engage as a result?
Multinational oil companies face growing competition with national oil companies (NOCs), which benefit from better access to global reserves of oil than the multinational companies. To cope, multinational companies use a few strategies:
• Using a concession method which excludes the local government as much as possible from the oil venture. The local government is entitled to a flat concession fee and has not stake in the upside.
• Using the “Mattei Formula” of inclusion of local governments in oil ventures rather than the old concession and exclusion method. Eni seems to be the only multinational company that does that.
• Production sharing agreements (PSAs) - a replacement to the concession based method, introduced in Congo in 1994, this method is similar in nature to the Mattei Formula and is intended to make the country a more equal partner of the oil companies.
• Innovating through projects that that demonstrate strong commitment to social and economic development in producer countries.
Eni’s strategy is to focus its attention in regions where others oil and gas companies have struggled against the perception that they are insensitive to local needs and circumstances. Africa is one such region. It uses the Mattei Formula and the CSR to gain better local cooperation and negotiation processes, thus mitigating the political risk in their operations, a risk that is matched only by the technological one.
CSR helps Eni to communicate its progressive approach to different stakeholders (locals, regulators, employees, shareholders) and this helps it gain competitive advantage and differentiation in these regions. Differentiation is especially important because these companies
Multinational oil companies face growing competition with national oil companies (NOCs), which benefit from better access to global reserves of oil than the multinational companies. To cope, multinational companies use a few strategies:
• Using a concession method which excludes the local government as much as possible from the oil venture. The local government is entitled to a flat concession fee and has not stake in the upside.
• Using the “Mattei Formula” of inclusion of local governments in oil ventures rather than the old concession and exclusion method. Eni seems to be the only multinational company that does that.
• Production sharing agreements (PSAs) - a replacement to the concession based method, introduced in Congo in 1994, this method is similar in nature to the Mattei Formula and is intended to make the country a more equal partner of the oil companies.
• Innovating through projects that that demonstrate strong commitment to social and economic development in producer countries.
Eni’s strategy is to focus its attention in regions where others oil and gas companies have struggled against the perception that they are insensitive to local needs and circumstances. Africa is one such region. It uses the Mattei Formula and the CSR to gain better local cooperation and negotiation processes, thus mitigating the political risk in their operations, a risk that is matched only by the technological one.
CSR helps Eni to communicate its progressive approach to different stakeholders (locals, regulators, employees, shareholders) and this helps it gain competitive advantage and differentiation in these regions. Differentiation is especially important because these companies