Mozambique: ENI Reaches Agreement with Exxon Sale of Stake

The Italian hydrocarbon company ENI has reached an agreement with the US supermajor oil company Exxon Mobil over the sale of a stake in the proposed onshore liquefied natural gas (LNG) facility in the northern Mozambican province of Cabo Delgado.

According to the news agency Reuters, two sources with knowledge of the matter have said that the negotiations over the multi-billion dollar stake have been concluded. The report added that the deal will not be announced for several months “at Exxon’s request”.

However, ENI refused to comment on the report, stating “we do not comment on market rumours or speculation”.

ENI is the operator in Offshore Area Four and holds a fifty per cent share in the block, which is estimated to contain 85 trillion cubic feet of natural gas. There have been persistent reports, published by news agencies such as Bloomberg, that the Exxon Mobil and Qatar Petroleum are looking at acquiring a stake in the Rovuma Basin.

Analysts expect that ENI will continue with its plans to construct a floating liquefied natural gas (FLNG) vessel to develop the Coral gas field. It is thought that Exxon Mobil and Qatar Petroleum are interested in taking a controlling share in the Mamba gas field, which straddles Area Four and Area One (where the operator is the US company Anadarko). This would also involve Exxon purchasing a stake in Area One, probably from Anadarko who holds a 26.5 per cent share in the block.

A deal such as this would offer a tremendous boost to the Mozambican government, which is in financial difficulties due to a fall in commodity prices, large sovereign debts, and a severe drought. Earlier this month, Bloomberg quoted a source as stating that acquiring a share of Anadarko’s Area One could generate capital gains tax of about 1.3 billion US dollars for the Mozambican government. Purchasing a stake in ENI’s Area Four would raise further revenue.

However, the Reuters report suggested that Exxon might only take control of the construction and operation of the onshore LNG facility whilst ENI would remain the operator of the gas fields in Area 4. This could have very different implications for tax liabilities.

Source: Agencia de Informacao de Mocambique.