ExxonMobil said it will buy 25 percent of a project off Mozambique from Italy’s Eni for about $2.8 billion as the U.S. oil giant expands in natural gas.
Exxon will buy half of Eni’s 50 percent indirect stake in offshore Area 4, held through a 71 percent stake in Eni East Africa, which owns 70 percent. The concession, where Eni discovered gas in 2011, includes both the Coral and Mamba gas fields, with reserves estimated at 85 trillion cubic feet.
Exxon’s involvement could accelerate the development of one of the world’s largest liquefied natural gas projects as oil majors increase their focus on the cleaner fuel, considered a bridge to a low-carbon future. While Eni will continue to operate the Coral floating LNG project and all upstream operations in Area 4, Exxon will lead the construction and operation of gas liquefaction facilities onshore.
“This strategic investment will enable Exxon Mobil’s LNG leadership and experience to support development of Mozambique’s abundant natural gas resources,” Chief Executive Officer Darren W. Woods said in a statement on Thursday.
Eni’s shares recovered earlier losses of as much as 3.2 percent and traded at 14.60 euros, down 1.4 percent, at 5:01 p.m. in Milan. Exxon was little changed in New York.
“Having Exxon as a partner is certainly positive given their experience in such complex projects,” said Alessandro Pozzi, an analyst at Mediobanca who had expected the stake to fetch only $2 billion. Exxon’s buy-in at a higher-than-expected price should “ease investor concerns” on the project, said Biraj Borkhataria, an analyst at RBC Europe.
Eni is making good on its March 1 promise to deliver 5 billion euros ($5.3 billion) to 7 billion euros of asset disposals by 2020. That target doesn’t include the sales of stakes in the giant Zohr gas project off Egypt to BP and Rosneft, which brought in $2.1 billion last year, according to Mediobanca.
For Exxon, the deal demonstrates its “LNG ambitions following the InterOil deal,” according to Anish Kapadia, senior research analyst at Tudor, Pickering, Holt & Co International. That $3.9 billion acquisition, completed last month, gave Exxon a 35 percent stake in the Elk-Antelope natural gas field in Papua New Guinea.
Mozambique’s state oil company, Korea Gas Corp. and Galp Energia SGPS SA each hold 10 percent of Area 4, while the remainder is owned by China National Petroleum Corp. through its 28.6 percent stake in Eni East Africa.
BP has agreed to buy all LNG production from the Coral South Floating LNG plant, it said in October. A final investment decision on that project has yet to be made amid concerns that it might be impacted by Mozambique’s failure to make an interest payment on a Eurobond in January, becoming the first African nation to default in six years.