* Eni talking to Shell, Exxon, LNG buyers - source
* Unitisation talks with Anadarko could raise tension
* Chinese supply chain an advantage
By Stephen Jewkes
MILAN, Dec 11 A year after Eni
announced the largest discovery in its exploration history, a
giant gas find in Mozambique, rival oil companies are falling
over each other to get a piece of the action.
"It was clear from the start it was a major discovery that
changed the ball game," a source close to the Milan-based
company told Reuters.
And the find is getting bigger by the day, drawing interest
from some of the world's largest energy players, many of which
are coming late to the party in the world's most prolific area
for new discoveries.
"Eni is in early talks with a few large players like Shell
and Exxon, and, interestingly, a few large LNG
buyers that could cover production and help speed final
investment decisions," a source familiar with the matter said.
The Maputo government says the Rovuma field, home to the
prospects discovered by Eni and Houston-based Anadarko
off Mozambique's northern coast, boasts an estimated 150
trillion cubic feet (tcf) of gas.
Energy consultancy Wood Mackenzie classifies it as one of
the world's biggest three gas basins.
The giant gas fields have showcased a part of the world some
are calling the new Middle East. The pickings are so rich that
East Africa's "new frontier" is now expanding north past
Tanzania to Kenya, Ethiopia and even war-ravaged Somalia.
But it's Mozambique that has captured the imagination. Its
deep waters are already peppered with rigs, and shiny new
liquefied natural gas (LNG) plants will soon dot the coast to
feed gas-starved Asian markets.
Four of the five largest oil and gas discoveries in the
world this year have been made off Mozambique, including three
b y Eni, according to Wood Mackenzie.
"We reckon Eni and Anadarko are sitting on 85 tcf of
recoverable gas, enough for multiple LNG trains, and we're
probably only at the half-way stage," says Martin Kelly, head of
the consultant's Sub-Sahara Upstream Research team.
The two LNG trains scheduled to be built in a first phase
will liquefy 10 million tonnes per year, enough to meet almost
10 percent of gas demand in Japan, one of the biggest Asian
"There's going to be a lot of competition and jostling for
position and Eni with its size and experience could be a
kingpin," says Kelly.
Most of the world's big energy players have been late in
waking up to East Africa and are now faced with the choice of
either splashing out on new concessions or buying into
operations that gambled on big finds.
France's Total, a deepwater specialist, recently
bought into a Rovuma venture led by Malaysia's Petronas, while
Shell lost out to Thailand's PTT in a $1.9 billion bid
for Cove Energy, a partner of Anadarko in Mozambique.
"I remember this used to be a counter-consensus exploration
play until the big finds came in last year. Just goes to show
you can have all the right skills and a big budget and still
miss the train," Bernstein energy analyst Rob West said.
Eni, Africa's biggest foreign operator, has 70 percent of
the Mamba field it operates with Galp Energia, Korea's
KOGAS and Mozambique's state-owned ENH in the Rovuma basin.
The field lies close to the Prosperidade acreage operated by
Anadarko and junior partner Cove.
Both operators insist they won't know how much gas they've
got until appraisal is complete next year. But already they are
gearing up to sell down stakes to fund big investment plans and
limit country risk in one of the poorest parts of the world.
Eni, which sees a long-term need for 10-12 LNG trains, has
slapped a ballpark number on investments of around $50 billion.
Anadarko, with no LNG credentials of its own, is looking to
sell a third of its 36.5 percent stake, while Eni is expected to
sell off at least 20 percent of its holding for cash or assets.
"One option Eni is playing with is the idea of creating two
sub-blocks - selling a majority stake in one and keeping a
majority in the other," a source close to the situation said.
Milan broker Mediobanca says that, based on the Cove deal,
Eni's 70 percent stake in Mamba field is worth $17.2 billion.
CHINA SUPPLY CHAIN
Mozambique's remoteness and lack of infrastructure means
heavy spending will be needed on roads, railways and ports even
before the new and expensive LNG terminals are built to liquefy
the first gas expected in 2018-2019.
Finding skilled workforce will also be a challenge.
"If I were Eni I'd be looking at the emerging national oil
companies. The Chinese can provide a supply chain and help boost
returns," Banco Santander oil analyst Jason Kenney said.
Former BP head Tony Haywood has said a key benefit of
his group's teaming up with China's CNPC in Iraq was access to
the Chinese supply chain. China can deliver just about anything
cheaper than elsewhere and not just rigs.
Together with India, Beijing is targeting Africa for natural
resources to fuel its economy, and bypassing the volatile Middle
East for energy supplies is particularly appealing.
Yet one banana skin for Eni could be what in the industry is
known as "unitisation".
A lot of the gas discovered is thought to be one enormous
field straddling the prospects of Eni and Anadarko. Eni has said
a third of its 75 tcf of gas is exclusively within its block,
while the rest is in a communicating area.
What that means is the two will have to sit down with the
Maputo government to decide who is in charge and agree a plan to
bring the gas to shore and build LNG plants and infrastructure.
"The challenge is that all of these projects have a lot of
participants, and just coordinating between the operators and
the participants within one consortium is probably quite a
challenge," said Anne Fruhauf, director for Africa energy at
consulting firm Horizon Client Access.
Talks are already under way, and while Eni and Anadarko
claim relations are good, some are concerned the spoils at stake
could create trouble.
"I've heard that Eni wasn't keen on working with Anadarko at
all," one industry source said.