Reuters/Milan

Italian oil firm Eni connected east Africa’s gas riches to energy-hungry China yesterday with the sale of a 20% stake in its Mozambique offshore project to Chinese oil company CNPC.
The $4.21bn deal, still subject to approval by Mozambique authorities, provides Eni with extra funding and reduces its share of an estimated $50bn development bill. It still has 50% of its biggest ever gas discovery — one that larger international oil and gas companies eye with envy — and may yet sell more.
“It’s great early monetisation on what is a world-class project and helps reduce Eni’s risk exposure to the area,” said Jason Kenney, oil analyst at Santander. Eni shares outperformed their peers yesterday, climbing 2.1% to €18.3 ahead of a strategy announcement due later in the day.
The deal connects one of the planet’s biggest untapped gas resources with its fastest growing gas consuming country, and could accelerate the onset of competition for Asian markets between east African and Australian supplies of Liquefied Natural Gas (LNG) — gas that is frozen and squeezed into special ships for export.
Analysts said the price, at between $2.1 and $2.25 per barrel of oil equivalent (boe) of reserves, was lower than some expectations, reflecting concerns about the direction of gas prices globally. It appears to vindicate industry heavyweight Royal Dutch/Shell’s decision to back out of a much higher-priced auction last year — at $3.0 per boe — for a stake in a neigbouring gas block — known as Area 1.
The other shareholders in Eni’s Area 4 prospect are Empresa Nacional de Hidrocarbonetos de Mocambique, the Mozambique state firm, Korea’s Kogas, and Portugal’s Galp Energia, each with a 10% stake.
Area 1 is owned by US explorer Anadarko Petroleum Corp and several other investors. A stake in it is also up for sale.
In total, the Rovuma field holds around 150tn cubic feet (tcf) of gas, enough to supply Germany, Britain, France and Italy for 15 years. Area 4 is thought to contain around 75 tcf. Area 1 is believed to be bigger at about 90 tcf.
CNPC, parent of Hong Kong and New York-listed PetroChina, has been in talks to buy the Area 4 stake for some time.
Sources have said other oil majors like ExxonMobil, Chevron Royal Dutch Shell and Total were interested. But a deal with these larger companies might have threatened Eni’s ownership of a project that is crucial to its future, while CNPC also creates the crucial customer connection that LNG projects traditionally need.
Eni and Anadarko have said they plan to unite exploitation of the two fields to boost their value, but in the meantime, attention now moves to the bidding for the stake in Area 1.
Anadarko and Indian tycoon Venugopal Dhoot are selling a 20% stake in Area 1. It was Thai group PTT which won the contest with Shell for Area 1 shareholder Cove Energy with a $1.9bn bid after Shell backed away from a bidding contest.
CNPC, China’s biggest energy company, already has gas and LNG joint ventures in place with Shell in Australia, China and Canada.
China is the world’s second-largest oil consumer and its growing demand for gas is the driver for most new LNG projects around the world, especially since the shale gas revolution in the US wiped out US import demand.
Yesterday’s deal also demonstrates the country’s determination to shift to cleaner burning gas as a transport fuel in an initiative that could cut its oil consumption by a tenth.
In a connected agreement, Eni said it had also signed a joint study agreement with CNPC to develop the Rongchang onshore shale gas block in China, joining Shell among international players there.
China has huge shale resources, possibly bigger than those of the US, but they are still a long way from being developed in any meaningful way.
The block covers about 2,000 sq km (770 sq miles) in the Sichuan Basin, close to the main consumption markets in China.
Eni already has shale-gas agreements in countries like Poland, Ukraine and Vietnam and which already has a shale agreement with China’s Sinopec.
Eni is due to hold a strategy meeting later yesterday with analysts focusing on shareholder remuneration after a series of disposals in recent months.