UPDATE 3-Eni, Anadarko tie-up boosts Mozambique gas prospects

Fri Dec 21, 2012 7:15pm IST

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* Deal affects two adjacent fields in the Rovuma Basin

* Cos say ops in the two fields will eventually be combined

* Will jointly construct onshore gas liquefaction facilities

* Some 150 tcf of gas already found off Mozambique coast

* Exxon, Shell, others have yet to gain a foothold there

By Francesca Landini

MILAN, Dec 21 (Reuters) - Oil and gas companies Eni and Anadarko plan to unite their neighbouring gas fields off Mozambique's coast, boosting the development prospects of one of the world's most significant new energy projects.

The two companies said on Friday that while their offshore activities would remain separate at first, they would be conducted in a co-ordinated way and the two adjacent fields they operate in the Rovuma Basin would eventually be combined.

Meanwhile, the partners will jointly plan and construct common onshore gas liquefaction facilities in the Cabo Delgado province of northern Mozambique.

Four of the five largest oil and gas discoveries in the world this year have been made off Mozambique. Potentially the biggest and most profitable of them all sits across the border between the blocks operated by state-backed Italian group Eni and U.S. independent Anadarko.

Some 150 trillion cubic feet (tcf) of gas have been found off the east African country's shores so far, enough to supply Germany, Britain, France and Italy for 15 years, and the government and companies scouting wells have estimated there may be potential to double that estimate.

Even the first stage of proposed Liquefied Natural Gas (LNG) facilities that allow the gas to be transported by special ship to energy-hungry Asian markets could satisfy 10 percent of demand in Japan, one of the region's biggest LNG markets.

COMMON RESOURCES

"We expect the HOA (heads of agreement) to lead to a unitisation agreement to further facilitate the efficient development of the common resources," said Anadarko President and CEO Al Walker.

He said the two groups would work alongside the Mozambican government toward a shared target of exporting first LNG cargoes in 2018.

A source familiar with the deal said it increased the likelihood that the 2018 deadline would be met.

"It's an important step because it shows they've got round a table fast to agree to work together (on unitisation)," the source said. "The importance is that without an agreement project times could have been thrown back."

Takeover talk has swirled around Anadarko through the past year, in large part because of its Mozambique position, with one banker describing the company as "the oil industry hottest M&A prospect in years".

A source close to Royal Dutch Shell has said the Netherlands-based world No. 2 has held talks about buying into Anadarko's block and is also interested in Eni's. Traders have also speculated Shell might bid for Anadarko.

Shell tried and failed earlier this year to buy a company that holds a stake in the Anadarko block. Thai group PTT eventually won the contest for Cove Energy with a $1.9 billion bid after Shell backed away from a bidding contest.

Other big players including BP, ExxonMobil and Chevron are also seen as likely to seek an interest in the fields. Shell and Chevron in particular are betting heavily on LNG as a future source of income, and do not want to find the costly Australian projects into which they are sinking tens of billions of dollars priced out of the market.

Friday's deal also represents a boost for Mozambique, which aims to use the gas finds as a starting point to develop domestic industries as the LNG exports lift government revenue by between $6 billion and $8 billion a year.

Anadarko is the operator of Mozambique's offshore Area 1 with a 36.5 percent interest. Japanese group Mitsui & Co owns 20 percent, India's Bharat Petroleum Corp 10 percent, Videocon Industries Ltd 10 percent, PTT 8.5 percent and Mozambique's state-owned ENH 15 percent.

Eni operates Area 4 with a 70 percent interest. Portugal's Galp Energia, South Korea's KOGAS and ENH hold 10 percent each.

Anadarko's stock climbed 2.5 percent on Thursday, making it the biggest gainer among top international oil stocks, although it is a consistently volatile stock and in out-of-hours trading on Friday it had given up much of that gain.

Eni shares were little changed.

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