Exxon Mobil Corp (XOM.N), the world's biggest publicly traded oil producer, has agreed to pay Italy's Eni (ENI.MI) $2.8 billion for a 25 percent stake in a giant Mozambique gas field to strengthen its position supplying rich Asian markets.
Eni is currently the operator of Mozambique's Area 4 license which, with 85 trillion cubic feet of gas in place, is one of the world's largest gas discoveries in recent years.
The offshore reserves - big enough to supply Germany, Britain, France and Italy with gas for nearly two decades - need a string of giant onshore and offshore liquefied natural gas (LNG) plants whose proximity to fast-growing consumer markets in Asia make the project highly lucrative.
The deal will put Exxon in charge of developing one of the world's biggest new sources of LNG after trailing peers such as Royal Dutch Shell (RDSa.L), which is doubling-down on the growth potential of gas as the world switches to cleaner-burning fuels.
"This strategic investment will enable ExxonMobil’s LNG leadership and experience to support development of Mozambique's abundant natural gas resources," Exxon Chairman and CEO Darren Woods said in a statement on Thursday.
The deal shows energy groups are still willing to invest in new production when the stakes are high enough, despite spending cuts put in place to offset the oil price slide.
It will also give Mozambique the chance to transform itself from one of the world's poorest countries into a wealthier state and a major global LNG exporter.
With billions of dollars tied up in developing its giant Zohr gas find in Egypt, Eni will also benefit from Exxon's deep-pockets and track-record of delivering complex LNG plants in remote areas on time and to budget.
The state-controlled company, which is selling down stakes in some of its prize discoveries to help fund growth and support dividends, has raised more than $9 billion in the last four years from disposals.
In 2013, Eni sold 20 percent of its Area 4 stake to China's CNPC for $4.2 billion but since then oil and gas prices have come down sharply.
At 1400 GMT, Eni stock was down 1.7 percent at 14.55 euros.
"Mozambique is going to be one of the world's largest gas hubs in the next 10-15 years and Exxon has to be there," Mediobanca oil analyst Alessandro Pozzi said.
Under the deal, Eni will continue to lead all upstream operations in Area 4, while Exxon will be in charge of building the onshore LNG plants.
Eni, which has previously estimated overall investments at around $50 billion, said it would remain in charge of building the floating LNG plant in the Coral field, part of Area 4.
Talks to bring on board a technically-savvy partner like Exxon have dragged on for months due to differences over valuations due to falling oil and gas prices.
Last year, sources told Reuters Eni had wrapped up the deal with Exxon but it would not be announced for several months at Exxon's request.
Exxon is already present in Mozambique after winning exploration licenses last year for offshore blocks to the south of Area 4.
(Story refiles to remove extraneous comma in byline.)
(Additional reporting by Oleg Vukmanovic; Editing by Sai Sachin Ravikumar and Mark Potter)