China National Petroleum Corporation, the country’s largest oil producer, will spend $4.2 bn for a stake in Eni SpA (ENI)’s African natural-gas assets as China looks to feed energy demand while reducing its reliance on coal.
CNPC will buy a 20 percent stake in Mozambique’s Area 4 where 75 trillion cubic feet of gas, or more than Norway’s existing reserves, has been found, state-controlled CNPC said in a statement on its website.
The purchase will be the biggest deal involving an Asian company announced so far this year and CNPC’s largest overseas purchase ever, according to data compiled by Bloomberg.
China’s oil companies have bought oil and gas fields in countries ranging from Australia to Canada to Nigeria to meet energy demand in the world’s fastest-growing major economy.
“This acquisition affirms China’s insatiable appetite for environmentally friendly natural gas projects, paving the way for more domestic natural gas pricing adjustments ahead,” the Head of energy research at Mirae Asset Securities Limited in Hong Kong, Mr. Gordon Kwan, said. “Coal will slowly lose market share in China in the coming decade.”
Pollution in Beijing rose to a record on January 12, sparking criticism of the government’s management of the environment.
Mozambique may have 250 trillion cubic feet of reserves, according to Empresa Nacional de Hidrocarbonetos, the country’s state-backed petroleum exploration company.
ENH, Galp Energia SGPS and Korea Gas Corporation each own 10 per cent of Area 4, according to the statement.
Eni “should share with the government” some of the proceeds of the stake sale to CNPC, Mozambican Energy Minister Salvador Namburete told reporters in the capital, Maputo. The company expects a maximum tax charge of 10 per cent, Chief Executive Officer, Mr. Paolo Scaroni, told reporters in London.
Mozambique’s offshore fields may hold enough gas to meet world consumption for more than two years, according to ENH.
Eni and Anadarko Petroleum Corporation, the two companies leading exploration in Mozambique, agreed last year to build the world’s second-largest liquefied natural-gas export plant to start sending fuel abroad in 2018.
Oil & Natural Gas Corporation and Oil India Limited, Indian state- run energy companies, made a joint bid to buy a 20 per cent stake the Rovuma-1 field, a person with direct knowledge of the matter said. The shares are being sold by Anadarko and Videocon Industries Limited, the person said, asking not to be identified because the information is not public. The sellers are divesting 10 per cent each in the offshore block.
Selling some of its gas discoveries allows Eni to spread the cost of developing the fields and building the LNG plant, estimated at $20bn by Mozambique’s government, and helps cement its relationship with Asia’s largest oil and gas company.
Mozambique is the biggest discovery in the history of Rome-based Eni, Italy’s largest company by market value.
“It’s a really good deal,” said Jason Kenney, an Edinburgh-based analyst at Banco Santander SA. “It’s going to de-risk the capital exposure for Eni. It’s a good price, fair price. There are significant resources.”
Eni rose 3.1 per cent to €18.49 in Italy. The company raised its production growth target to more than four per cent a year through 2016.
Eni and CNPC will also jointly study shale-gas exploration in China’s Sichuan basin, according to the statement. If the gas can be commercialised, the two companies will discuss the terms of a production-sharing contract.
