(MENAFN- The Peninsula) Italy's Eni is open to selling a stake in its "supergiant" Zohr gas field discovery off Egypt, its chief executive said, as the state-controlled energy company looks for funds to bankroll development without sacrificing dividends.
Eni said on Sunday that it had discovered the largest known gas field in the Mediterranean off Egypt, covering an area of about 100 square kilometres (39 square miles) and containing a potential 30 trillion cubic feet (tcf) of gas.
The find could help meet energy-starved Egypt's gas needs for decades and pose a challenge to other gas projects in Egypt, Israel and Cyprus.
Eni last year was the first oil major to cut its dividend after a plunge in global oil prices. It has already sold part of its gas discovery in Mozambique and is seeking to sell another 15 percent.
Eni Chief Executive Claudio Descalzi did not rule out also selling a stake in the Egypt find. "It's an open door to give value and solidity to Eni's balance sheet," Descalzi said in an interview published yesterday by Italian newspaper La Repubblica.
"But it will not be a necessary outcome. There is much less to spend than in Mozambique and the new gas is aimed at the local domestic market with prices disconnected from those of oil, which today are at six-year lows," he said.
Once an energy exporter, declining oil and gas production and increasing consumption has forced Egypt to divert energy supplies to the domestic market, turning it into a net importer. It began imports of liquefied natural gas (LNG) in June.
The Zohr discovery along with planned import deals from Israel could potentially allow Egypt to resume some gas exports.
It follows other significant gas discoveries in the Mediterranean in recent years, including off Egypt, Israel and Cyprus. The projects are seen as a means of lowering Europe's dependence on Russian gas imports.
The gas find bolsters Eni's top-flight exploration credentials and gives the Italian energy group access to easy reserves that fit its strategy of seeking growth without sacrificing dividends.
The company's initial investment in Zohr will be about $3.5bn, an Egypt official said, though the country's state gas company said that the total could stretch to twice that figure. "With the full completion of development for the field, investments will (reach) $7bn," the head of EGAS, Khaled Abdel Badie, said yesterday.
The good quality of gas discovered at Zohr and the field's proximity to the shore and existing pipeline infrastructure makes it relatively easy and cheap to develop, especially compared with the more remote discoveries off Mozambique, which had to be developed from scratch.
"The news in Egypt is supportive of our view that Eni is the best self-help story among the large-cap integrated oils and continues to keep momentum with a strong growth story," Bank of America Merrill Lynch analysts said, adding that the field was potentially worth up to $5bn to Eni.
The company is still looking to sell down stakes in top acreage such as Mozambique and Congo to help to fund upstream development and dividends, and its CEO reaffirmed that the current dividend was a floor after its recent cut. "We will not go below," he said in comments aired on Class CNBC.
Santander analyst Jason Kenney said that Eni is likely to look at selling a 30-40 percent stake in Zohr within three to four years. Yet disposals could be challenging in an environment of low oil prices, with a shrinking pool of potential buyers and several competitors also engaging in asset sales to shore up balance sheets, analysts said.
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.