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Property, plant and equipment

12 Months Ended

Dec. 31, 2017

Disclosure of property, plant and equipment [text block]

16 Property, plant and equipment

(€ million)	Land			Buildings			Plant and machinery			Industrial and commercial equipment			Other assets			Tangible assets in progress and advances			Total
2017
Net book amount at the beginning of the year		448			810			50,270			300			309			18,656			70,793
Additions		2			20			153			27			52			8,236			8,490
Depreciation					(71	)		(6,996	)		(63	)		(69	)					(7,199	)
Net (impairments) reversals		(5	)		(5	)		436			(1	)		(5	)		(213	)		207
Disposals		(12	)		(3	)		3						(6	)		(1,430	)		(1,448	)
Write-off								(3	)		(2	)					(234	)		(239	)
Currency translation differences		(2	)		(3	)		(5,272	)		(8	)		(18	)		(1,722	)		(7,025	)
Other changes		47			87			10,571			(17	)		(2	)		(11,107	)		(421	)
Net book amount at the end of the year		478			835			49,162			236			261			12,186			63,158
Gross book amount at the end of the year		571			3,490			160,751			1,264			1,954			15,747			183,777
Provisions for depreciation and impairments		93			2,655			111,589			1,028			1,693			3,561			120,619
2016
Net book amount at the beginning of the year		510			818			40,667			326			403			25,281			68,005
Additions		1			22			204			32			42			8,766			9,067
Depreciation					(66	)		(7,087	)		(66	)		(89	)					(7,308	)
Net (impairments) reversals		(64	)		(3	)		345			(1	)		(17	)		(174	)		86
Write-off								(198	)		(2	)					(89	)		(289	)
Currency translation differences		1			1			1,329						4			551			1,886
Reclassification to assets held for sale		(8	)		(2	)		(1	)											(11	)
Other changes		8			40			15,011			11			(34	)		(15,679	)		(643	)
Net book amount at the end of the year		448			810			50,270			300			309			18,656			70,793
Gross book amount at the end of the year		537			3,416			167,007			1,415			2,160			22,737			197,272
Provisions for depreciation and impairments		89			2,606			116,737			1,115			1,851			4,081			126,479

A breakdown by segment of capital expenditures is provided below:

(€ million)	2017			2016
Capital expenditures
Exploration & Production		7,638			8,217
Gas & Power		87			66
Refining & Marketing and Chemical		712			655
Corporate and other activities		69			42
Elimination of intragroup profits		(16	)		87
		8,490			9,067

Capital expenditures included capitalized finance expenses of €72 million (€105 million in 2016) related to the Exploration & Production segment (€56 million). The interest rates used for capitalizing finance expense ranged from 1.6% to 2.7% (2.7% to 5.3% at December 31, 2016).

The main depreciation rates used were substantially unchanged from the previous year and ranged as follows:

(%)
Buildings			2 - 10
Mineral exploration wells and plants			UOP
Refining and chemical plants			2 - 17
Gas pipelines and compression stations			2 - 12
Power plants			5
Other plant and machinery			6 - 12
Industrial and commercial equipment			5 - 25
Other assets			10 - 20

The criteria adopted by Eni for determining net (impairments) reversals is reported in note 19 — Impairment/reversal of tangible and intangible assets.

Disposals of €1,448 million included the disposal of a 40% interest in the Zohr asset in Egypt for €1,328 million to BP (10%) and Rosneft (30%) with a gain of € 1,281 million. The deferred consideration amounted to €553 million ($663 million), of which €442 million ($530 million) will be collected by June 2018 (Notes 11 — Trade and other receivables and note 23 — Other non-current assets).

Write-off of €239 million (€289 million in 2016) related for €237 million to the Exploration & Production (€93 million in 2016), of which €217 million relating to suspended exploration wells that did not encountered enough quantities of commercial hydrocarbons to justify their completion as productive wells in particular in Egypt, Norway and Ivory Coast.

The amount of €7,025 million relates to currency translations from U.S. dollar for €6,533 million.

Other negative changes of €421 million included the net effect of the divestment to ExxonMobil of a 35.7% interest in the joint operation Mozambique Rovuma Venture SpA (former Eni East Africa SpA), concessionaire of the Area 4 offshore Mozambique where development is underway, for €648 million. This effect was partially offset by an increase in capitalized asset retirement costs in the Exploration & Production segment amounting to €355 million (€665 million at December 31, 2016) mainly due to a decrease in the discount rate curve, especially for the U.S. dollar, to the recognition of new retirement obligations and the revision of cost estimates.

Property, plant and equipment include costs related to exploration activities and appraisal and tangible assets in progress and advances of the Exploration & Production segment:

(€ million)	Exploratory wells in progress			Exploratory wells completed and being evaluated			Exploratory successful wells in progress			Exploration activity and appraisal			Unproved mineral interest			Wells and installments in progress			Abandonment costs			Other tangible assets in progress			Total
2017
Book amount at the beginning of the year		221			1,684			913			2,818			2,450			11,690			82			14,222			17,040
Additions		351									351			112			7,190						7,302			7,653
Net (impairments) reversals								(13	)		(13	)		147			(111	)					36			23
Write-off		(11	)		(217	)					(228	)					(2	)					(2	)		(230	)
Reclassifications		(438	)		173			(117	)		(382	)		(7	)		(9,538	)		(11	)		(9,556	)		(9,938	)
Other changes and currency translation differences		(15	)		(377	)		(294	)		(686	)		(312	)		(2,676	)		(34	)		(3,022	)		(3,708	)
Book amount at the end of the year		108			1,263			489			1,860			2,390			6,553			37			8,980			10,840
2016
Book amount at the beginning of the year		93			1,737			807			2,637			2,212			19,458						21,670			24,307
Additions		402									402			2			7,777						7,779			8,181
Net (impairments) reversals								(5	)		(5	)		190			(210	)					(20	)		(25	)
Write-off					(109	)					(109	)					(6	)		27			21			(88	)
Reclassifications		(282	)		6			78			(198	)		(35	)		(15,699	)					(15,734	)		(15,932	)
Other changes and currency translation differences		8			50			33			91			81			370			55			506			597
Book amount at the end of the year		221			1,684			913			2,818			2,450			11,690			82			14,222			17,040

Reclassifications of €9,938 million mainly related to: (i) development wells and plants in progress for €9,538 million; (ii) exploratory successful wells for €382 million following the production start-up of the underlying projects during 2017 in Angola, Ghana, Indonesia and Egypt.

Changes in exploration and appraisal activities comprised: (i) reclassifications of €438 million of exploratory wells in progress to completed exploration wells that are suspended pending final determination; (ii) write-offs of €228 million related to unsuccessful exploration wells.

The following information relates to the stratification of the suspended wells pending final determination (aging):

(€ million)	2017			2016			2015
Costs for exploratory wells suspended at the beginning of the period		1,684			1,737			1,568
Increases for which is ongoing the determination of proved reserves		451			282			550
Amounts previously capitalized and expensed in the period		(217	)		(109	)		(501	)
Reclassification to successful exploratory wells following the estimation of proved reserves		(278	)		(276	)		(30	)
Disposals		(199	)					(4	)
Currency translation differences		(178	)		50			154
Costs for exploratory wells suspended at the end of the period		1,263			1,684			1,737

	2017				2016				2015
	(€ million)		(number of wells in Eni’s interest)		(€ million)		(number of wells in Eni’s interest)		(€ million)		(number of wells in Eni’s interest)
Costs capitalized and suspended for exploratory well activity
- within 1 year		222		7.95		16		1.05		368		5.32
- between 1 and 3 years		241		3.87		609		10.25		634		11.14
- beyond 3 years		800		21.44		1,059		21.55		735		18.97
		1,263		33.26		1,684		32.85		1,737		35.43
Costs capitalized for suspended wells
- fields including wells drilled over the last 12 months		148		5.88		9		0.55		368		5.32
- fields for which the delineation campaign is in progress		261		4.69		251		3.51		228		4.13
- fields including commercial discoveries that proceeds to sanctioning		854		22.69		1,424		28.79		1,141		25.98
		1,263		33.26		1,684		32.85		1,737		35.43

Unproved mineral interests include costs allocated to unproved reserves following business combinations or costs incurred to acquire individual properties. Unproved mineral interests were as follows:

(€ million)	Congo			Nigeria			Turkmenistan			USA			Algeria			Egypt			Total
2017
Book amount at the beginning of the year		1,254			938			138			113						7			2,450
Additions														112						112
Net (impairments) reversals		72						75												147
Reclassification to proved mineral interest		(7	)																	(7	)
Other changes and currency translation differences		(157	)		(113	)		(21	)		(14	)		(7	)					(312	)
Book amount at the end of the year		1,162			825			192			99			105			7			2,390
2016
Book amount at the beginning of the year		1,021			908			165			109						9			2,212
Additions																	2			2
Net (impairments) reversals		190																		190
Reclassification to proved mineral interest								(31	)								(4	)		(35	)
Other changes and currency translation differences		43			30			4			4									81
Book amount at the end of the year		1,254			938			138			113						7			2,450

Unproved mineral interest of €2,390 million comprised a property known as Oil Prospecting License 245 (“OPL 245”), located offshore Nigeria, with a net book value of €818 million, which corresponded to the price paid to the Nigeria Government to acquire a 50% interest in OPL 245, with the partner Shell acquiring the remaining 50%. As of December 31, 2017, the net book value of the property was €1,107 million, including capitalized exploration costs and pre-development costs. The acquisition of OPL 245 is subject to judicial proceedings in Italy and in Nigeria for alleged corruption and money laundering in respect of the Resolution Agreement signed on April 29, 2011, relating to the purchase of the license by Eni and Shell. Those proceedings are disclosed in note 38 — Guarantees, Commitments and Risks. Additions of the year of €112 million related to the extension of an oil contract in Algeria.

Accumulated provisions for impairments amounted to €16,005 million (€17,558 million at December 31, 2016).

At December 31, 2017, Eni pledged property, plant and equipment for €24 million primarily as collateral against certain borrowings (same amount as of December 31, 2016).

Government grants recorded as a decrease of property, plant and equipment amounted to €110 million (€90 million at December 31, 2016).

Assets acquired under financial lease agreements amounted to €29 million (same amount as of December 31, 2016) and related to service stations of the Refining & Marketing business line.

Contractual commitments related to the purchase of property, plant and equipment are disclosed in note 38 — Guarantees, commitments and risks — Liquidity risk.

Property, plant and equipment under concession arrangements are described in note 38 — Guarantees, commitments and risks — Assets under concession arrangements.

Property, plant and equipment by segment

(€ million)	December 31, 2017			December 31, 2016
Property, plant and equipment, gross
Exploration & Production		152,608			165,559
Gas & Power		5,333			6,276
Refining & Marketing and Chemical		24,554			24,119
Corporate and other activities		1,866			1,886
Elimination of intragroup profits		(584	)		(568	)
		183,777			197,272
Accumulated depreciation, amortization and impairment losses
Exploration & Production		95,775			101,131
Gas & Power		3,954			4,584
Refining & Marketing and Chemical		19,625			19,477
Corporate and other activities		1,525			1,518
Elimination of intragroup profits		(260	)		(231	)
		120,619			126,479
Property, plant and equipment, net
Exploration & Production		56,833			64,428
Gas & Power		1,379			1,692
Refining & Marketing and Chemical		4,929			4,642
Corporate and other activities		341			368
Elimination of intragroup profits		(324	)		(337	)
		63,158			70,793