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Italian energy giant Eni SpA (E - Analyst Report) confirmed that its joint venture with the state-run oil holding Petróleos de Venezuela SA (PDVSA) has commenced producing first oil from Junín 5, an oilfield located at the Orinoco Oil Belt, southern Venezuela.

PetroJunín, a joint venture between PDVSA and Eni, started production nine months ahead of Phase 1 schedule. The companies intend to generate approximately 15,000 barrels per day (BPD) by year end at the Junín 5. The block is situated around 550 kilometers south east of Caracas with 35 billion barrels of oil equivalent (BBOE) of certified oil in place.

The explorers intend to boost the production to about 75,000 BPD by early 2015 with the drilling of around 180 wells. After the completion of the Phase 2 development, the block is expected to produce 240,000 BPD by the end of 2018. The companies also planned to drill nearly 1500 wells throughout the expected 40 years of field lifespan. PDVSA holds a 60% share in the PetroJunin joint venture and acts as the operator, with Eni on 40%.

Eni also holds a stake in another Venezuela block. The company is the co-operator in Cardón IV − the operating company controlling the huge Perla gas field. The company expects Perla to contain around 17 Trillion cubic feet (Tcf), or 3.1 BBOE. The project is expected to comprise of Eni with 32.5% interest and Repsol 32.5%. PDVSA will also hold a 35% stake after its entry in the project.

Again, the Italian company holds an interest in Petrosucre − the operating company of the Corocoro offshore field. PDVSA owns a 74% share and Eni 26% in the filed, which currently has a net daily production of around 10,000 barrels.

The latest upstream venture is in sync with Eni’s constant efforts to expand its exploration operations. Moreover, project start-ups, inputs from big projects in Iraq, Australia, Russia as well as Egypt, as well as its strategic position in non-conventional gas, are expected to augment volumes going forward.

The company also made a record number of discoveries during 2012 and added resources of 3.64 BBOE. At the end of 2012, Eni’s proved reserves were at an eight-year high of 7.17 BBOE and the organic reserve replacement ratio was 147%.

However, Eni believes that a certain degree of ambiguity still looms with respect to the economic slowdown, particularly in the Euro Zone. The European gas, refining and marketing, and chemicals sectors also remain highly volatile. Overall demand will likely remain weak due to the ongoing economic dormancy.

Eni currently carries a Zacks Rank #4, which translates into a Sell rating. There are other stocks in the oil and gas industry that appear more attractive. These include Total SA (TOT - Analyst Report) , Statoil ASA (STO - Analyst Report) and YPF S.A. (YPF - Snapshot Report) that hold a Zacks Rank #2 (Buy) and are expected to perform better.

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