24 Nov 2016 – BP [NYSE:BP] is to acquire a 10% stake in Eni’s [NYSE:E] giant Zohr gas field in Egypt in a deal that is set to be signed on Friday (25 November), a source with knowledge of the situation said.
The stake sale is worth USD 1.5bn, the source said. It comes with an option for BP to acquire an additional 5% of the gas field in the future.
In July, Mergermarket broke the news that Eni is in talks with multiple parties over stake sales in Zohr. Many of these talks are still ongoing, and the BP deal is the first leg of a series of deals that will take Eni’s ownership of the gas field to 50%, the source said. The series of stake sales are targeted to be completed by April 2017, this new service reported previously.
Shell [LON:RDSA] is understood to be one of the companies vying for a stake in Zohr.
A sale and purchase agreement between Eni and BP was initialed on the evening of 22 November, ahead of its finalization on Friday, the source said. The two companies did not hire any banks to advise on the transaction, which was instead brokered by the two majors’ in-house M&A teams, the source added.
The discovery of Zohr was announced in August 2015. It holds 30 trillion cubic feet (tcf), making it the world’s fifth largest gas field.
Mergermarket has previously reported the Egyptian government expects the gas field to be pivotal for its energy security. At present the country is heavily reliant on LNG imports. Egypt’s natural gas industry has suffered setbacks in recent years, due to under-investment in upstream assets, political unrest and regulatory uncertainty.
BP already has a major presence in Egypt through its West Nile Delta license and its Atoll field. The Egyptian government would not agree to Eni exporting the gas from Zohr, and this is why the company is looking to sell a large stake in the project. Gas sold domestically in Egypt is priced at a discount to market.
Eni announced earlier this year it is targeting EUR 7bn in asset disposals by 2019.
Eni’s market cap is USD 49.03bn, while BP’s stands at USD 107.8bn.
BP, Shell and Eni did not respond to requests for comment.
By Katie McQue