Eni Reaches Deal with Exxon on Mozambique Gas Project

 

"The deal is done but won't be announced for several months at Exxon's request," one of the sources said.

 

Eni declined to comment, while a spokesman for Exxon said, "We do not comment on market rumours or speculation".

 

The offshore gas reserves already discovered by Eni in Area 4 are large enough to need a giant land-based LNG export plant whose proximity to Asian and Middle Eastern growth markets makes it potentially a highly-lucrative project.

 

But talks to bring in a technically-savvy partner with deep pockets like Exxon have dragged on due to a differences over valuations in the light of falling oil and gas prices.

 

In 2013 Eni sold 20 percent of its Area 4 licence to China's CNPC for $4.2 billion but since then oil and gas prices have come down by more than half.

 

However, last year Mozambique awarded Exxon three offshore exploration licence blocks of its own which sit to the south of Eni's discoveries, giving a new dimension to development prospects.

 

"As you are aware, on October 28, 2015, Exxon was awarded three offshore blocks in Mozambique," the spokesman for Exxon said.

 

"We look forward to further discussions with the Mozambique government on the development of a production-sharing contract for the blocks."

 

Eni has been reluctant to sell too much of its 50 percent stake in the Area 4 permit where as operator it has already found 85 trillion cubic feet of gas.

 

But in recent weeks Eni Chief Executive Claudio Descalzi has raised the possibility of it selling up to a 25 percent stake, up from the 10-15 percent previously on offer.

 

The two sources said after lengthy talks, Eni and Exxon have now agreed terms and "sealed" a deal that could give Exxon its desired operating stake in the onshore LNG export plant while Eni would retain control over the Area 4 gas fields feeding it.

 

Last week Descalzi reiterated Eni's desire to remain operator for the gas fields.

 

"Our model is to remain and keep the operatorship or keep, in any case, a clear control on the asset - the asset that we discovered," he told analysts.

 

While Eni will export gas as LNG from at least one floating offshore platform in the Coral field development in Area 4, the main focus of work will be on the larger land-based plants.

 

The Coral field will remain outside the scope of the deal with Exxon, the sources said, and Eni has earmarked LNG from the Phase I development of Coral to BP.