Anadarko advised by Société Générale on Mozambique LNG project stake sale

02 Oct 2015 – Société Générale is leading negotiations for the sale of a 10% stake in Anadarko’s [NYSE:ADC] liquefied natural gas project in Mozambique, a person with knowledge of the situation.

Linklaters has been mandated as the legal adviser, the person said.

Anadarko and Linklaters did not respond to a request for comment. A spokesperson for Société Générale confirmed it is advising on the project but did not comment on the stake sale.

Anadarko’s chief executive Al Walker was reported as saying in May that the company was not negotiating the sale of its gas assets in Mozambique and that no banks had been hired.

The project, which is in development includes a licence, known as Block 1, which has estimates reserves of 75 tcf of gas, and also an LNG liquefaction facility.

The consortium holding the licence for Block 1 is made up of Anadarko, with 26.5% of the equity and also operatorship, Mozambique’s state oil company Empresa Nacional de Hidrocarbonetos (ENH) with 15%, Mitsui & Co [TYO:8031] with 20%, Thai state oil company PTTEP [BKK:PTTEP] with 8.5%, and with Oil and Natural Gas Corp (ONGH) [BOM:500312], Oil India Limited [BOM:533106] and Bharat Petroleum Corp [BOM:500547] each holding 10%.

The Anadarko project also includes the intention to build LNG liquefaction facilities on the planned Afungi LNG Park. Anadarko is expected to make the final investment decision (FID) on the project by the end of 2015, the company has said.

Two deals with potential Asian buyers have fallen down over price, the person said.

Anadarko is benchmarking the price of the stake against a deal done by Eni [BIT:ENI] in 2013, when it sold a 20% stake of an adjacent block, Block 4, the person added. At the time a 20% stake was sold for USD 4.2bn, yet oil and gas prices have plummeted since then.

Potential bidders will need experience of LNG and deepwater operations, as well as liquidity and a long-term natural gas strategy as there is considerable short-term risk on this project, an industry banker said. Shell [LON:RDSA] and ExxonMobil [NYSE:XOM] are obvious contenders as both are rumoured to be interested in the region, he said, with Statoil [OSL;STL] also a strong candidate as it has a presence in neighbouring Tanzania and strong technical experience of these plays.

However, according to a second industry banker, the size on offer would not be enough to entice the majors as it doesn’t offer enough control or return, so likely bidders would be from within the existing consortium.

The problem is the project is looking for financing, and to get financing it needs to secure gas purchase agreements, no potential customers want to commit, the source added.

Several companies have expressed interest in purchasing the gas from Block 1. Anadarko has said preliminary no-binding deals have been reached with Thailand’s PTT [BKK:PTT], China’s National Offshore Oil Corp (CNOOC), Indonesia’s state-owned firm Pertamina, Singapore, the United Arab Emirates, and a Japanese joint-venture vehicle named Jera that consists Tokyo Electric Power Co [TYO:9501] and Chubu Electric [TYO:9501]. Anadarko has said these agreements amount to 8m tons of LNG a year.

Block 4’s operator is Eni East Africa, which is a joint venture between Eni and the China National Petroleum Corporation (CNPC), where CNPC holds a 28.57% stake, which translates to a 20% stake of Block 4. Other stakeholders include ENH, Galp Energia [ELI:GALP] and Kogas [KRX:036460], who each hold stakes of 10%.

Eni has also been reported to be in talks to reduce its stake of Block 4 by 15%. Companies said to be interested in farming in include the Chinese state-owned utility Huadian [SHA:600027]. In 2013 Eni sold a 20% stake of the project to CNPC for USD 4.2bn, yet oil and gas prices have halved since then.

Block 4 has estimated reserves of 85 tcf, held in its two gas fields – Mamba and Coral.

By Katie McQue, with additional reporting by Patrick Harris

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