9 March 2017

Mozambique: Eni Sells Stake in Rovuma Basin to Exxonmobil

London — The Italian energy company ENI announced on Thursday that it has signed a sale and purchase agreement with the US company ExxonMobil, under which ExxonMobil will pay 2.8 billion US dollars for a 25 per cent stake in offshore Area 4 in the Rovuma Basin in northern Mozambique.

ENI controls a 50 per cent indirect interest in Offshore Area Four, owned through ENI-East Africa, which holds 70 per cent of the concession. The remaining 20 per cent held via ENI-East Africa belongs to the Chinese company CNPC. The other three partners, with ten per cent each, are Galp Energia of Portugal, Kogas, and Mozambique's National Hydrocarbon Company (ENH).

Plans are advanced to set up a floating liquefied natural gas (FLNG) facility in Area Four above the Coral South gas field. So far, the consortium has invested about 2.8 billion US dollars in Area Four, and it is estimated that the FLNG project will cost a further eight billion dollars.

Production of LNG is due to begin in 2022. However, the Final Investment Decision cannot take place until CNPC formerly commits itself to the investment (all the other partners have now approved their share of the investment).

An agreement has already been reached under which all the gas produced from the FLNG plant will be sold to the British company BP over a twenty year period.

Commenting on the decision to buy a stake in Area 4, the chief executive officer of ExxonMobil, Darren W. Woods explained, “this strategic investment will enable ExxonMobil's LNG leadership and experience to support the development of Mozambique's abundant natural gas resources. Our industry-leading project execution, advanced technologies, financial strength and marketing capabilities will help deliver reliable, affordable energy to customers and create long-term economic value for the people of Mozambique, project partners and ExxonMobil shareholders”.

ENI stated that it will continue to lead the Coral FLNG project and all upstream operations in Area 4, while ExxonMobil will lead the construction and operation of natural gas liquefaction facilities onshore. It argues that “this operating model will enable the use of best practices and skills within ENI and ExxonMobil with each company focusing on distinct and clearly defined scopes while preserving the benefits of a fully integrated project”.

The acquisition is subject to a number of conditions including clearance from Mozambican government and other regulatory authorities.

If it goes ahead, it will lead to a very large payment of capital gains tax by ENI to the Mozambican state.

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