Talks between Eni and suitors including Chinese state utility Huadian for a stake of around 15 percent in the Italian oil major’s prized Mozambique gas field are dragging on due to differences over price, industry and banking sources said.
State-controlled Eni is looking to sell around 8 billion euros ($8.8 billion) of assets in the next five years to fund growth in new markets and help ringfence dividends.
In Mozambique, Eni is looking to sell down its 50 percent stake in its Area 4 field. But its insistence on remaining operator is likely to exclude majors such as Exxon and Shell who tend to favour controlling investments in big oil and gas projects, the sources said.
“Eni’s been talking to Huadian for a while, though there are other interested parties too. The aim is to close this year,” one source with knowledge of the matter said.
Eni declined to comment. Huadian did not immediately reply to an email for comment.
Area 4 is located in Mozambique’s Rovuma Basin, where gas in place amounts to some 85 trillion cubic feet — one of the richest gas discoveries in recent times.
Plans are to convert it into liquefied natural gas, or LNG, using onshore refrigeration plants so that it can be loaded onto tankers and shipped to consuming markets in Asia.
“There is interest … it remains to be seen if Eni has readjusted its pricing expectations,” another banker familiar with the matter said.
The field’s huge productive capacity attracted peak valuations two years ago, when Eni sold 20 percent to China’s CNPC for $4.2 billion, amid strong competition for reserves that could underpin one of the world’s biggest gas export plants.
But a halving of oil and gas prices since then, combined with an upcoming surge in global LNG export capacity and slowing demand, has dampened buyers’ enthusiasm while Eni has been reluctant to budge on price, sources said.
An oil analyst familiar with the Italian major said he calculated a 15 percent stake in the Mozambique field would be worth just $1.5 billion at today’s oil prices.
“Given the price uncertainty, Eni could end up selling down its Congo acreage first since that is all oil, easy to extract and very fast to get to market,” the analyst said.
In April CFO Massimo Mondazzi said Eni would sell at least one exploration asset this year.
Eni, led by former exploration and production unit boss Claudio Descalzi, has earmarked 90 percent of future spend on finding oil and gas, and plans to focus on new areas such as Asia.
“There’s a lot of Chinese interest in Mozambique, with more than one second-tier Chinese company in the framework,” one of the sources said.
Chinese independent buyers have started to emerge as importers of LNG as Beijing allows them to use idle import terminal capacity and build their own facilities.
Huadian recently took a 5 percent stake in an $11 billion Canadian gas export project and said it was planning to build a receiving terminal on China’s southeast coast.
But if new Asian buyers are eying gas supply opportunities, falling oil prices have tempered the appetites of the majors.
After a 5-year spending spree of $180 billion, Asian national oil companies took a break last year with spending by China NOCs just $5.2 billion, says oil-gas consultancy 1Derrick.
“Why lash out on undeveloped assets needing heavy investment when you can buy cheaper in places like the U.S., Canada and the North Sea,” 1Derrick Managing Director Mangesh Hirve said.
Another complication for potential investors in Area 4 is uncertainty over if and when Eni will start work with neighbouring Anadarko Petroleum to coordinate development and share costs on their two separate but straddling LNG export schemes in Mozambique.
“The problem for current stake sale talks is that there is new uncertainty over whether unitisation will happen – which wasn’t there when CNPC paid,” a banking source said, adding this could apply downward pressure to the Area 4 price.