* To sell 20 pct stake in offshore field for $4.21 bln
* Eni keeps 50 pct stake, could sell down further
* Deal includes potential Eni access to shale gas in China
* Eni raises output growth target to over 4 pct/yr
* Neighbouring field generates bid interest from India
(Adds Eni management comments, news of Indian bid)
By Stephen Jewkes and Giancarlo Navach
MILAN/LONDON, March 14 Italian oil firm Eni
connected east Africa's gas riches to energy-hungry
China on Thursday with the sale of a 20 percent stake in its
Mozambique offshore project to Chinese oil company CNPC.
The $4.21 billion deal, still subject to approval by
Mozambique authorities, provides Eni with extra funding and
reduces its share of an estimated $50 billion development bill.
The Italian firm still has 50 percent of its biggest ever
gas discovery - one that larger international oil and gas
companies eye with envy, and Chief Executive Paolo Scaroni said
the company may yet sell more.
"It's great early monetisation on what is a world-class
project and helps reduce Eni's risk exposure to the area," said
Jason Kenney, an oil analyst at Santander.
The deal joins one of the planet's biggest untapped gas
resources with its fastest growing gas consuming country and
could accelerate the onset of competition for Asian markets
between east African and Australian supplies of liquefied
natural gas (LNG), which is super-cooled and squeezed into
special ships for export.
It came as Eni outlined its strategy for the years ahead,
raising its output growth target to more than 4 percent a year
to 2016 from over 3 percent in the previous plan.
It also promised higher future returns for shareholders,
with some of the payouts coming from an asset disposal
programme. Eni shares outperformed their peers on Thursday,
climbing 2.9 percent to 18.45 euros.
The other shareholders in Eni's Area 4 prospect are state
firm Empresa Nacional de Hidrocarbonetos de Mocambique, Korea's
Kogas and Portugal's Galp Energia, each with a 10
Despite the obvious benefits to Eni from the deal, analysts
said the price paid by CNPC at $2.10 to $2.25 per barrel of oil
equivalent (boe) of reserves was lower than some expectations,
reflecting concerns about the direction of gas prices globally.
It appears to vindicate industry heavyweight Royal Dutch
Shell's decision last year to back out of a
higher-priced auction at $3 per boe for a stake in a
neighbouring gas block known as Area 1, operated by U.S.-based
In total, the Rovuma field holds around 150 trillion cubic
feet (tcf) of gas, enough to supply Germany, Britain, France and
Italy for 15 years. Area 4 is thought to contain around 75 tcf.
Area 1 is believed to be bigger at about 90 tcf.
CNPC, parent of Hong Kong and New York-listed PetroChina
, has been in talks to buy the Area 4 stake for some
Sources have said other oil majors such as ExxonMobil
, Chevron, Shell and Total were
interested in Eni's block. But a deal with these larger
companies might have threatened Eni's ownership of a project
that is crucial to its future, while a link with CNPC also
creates the crucial customer connection that LNG projects
"It gives value to the project to have customers as
shareholders such as Kogas and now CNPC," Eni Chief Executive
Paolo Scaroni said in a conference call. "Who knows, even
contracts with them moving on, since it gives robustness to the
Eni and Anadarko have said they plan to unite exploitation
of the two fields to boost their value. In the meantime,
attention moves to the bidding for the stake in Area 1.
Anadarko and Indian tycoon Venugopal Dhoot are selling a 20
percent stake in Area 1. In last year's auction,
Thai state oil company PTT had won the contest for 8.5
percent of the field after Shell backed away.
In a coincidental development on Thursday, the first bidder
for the next 20 percent stake emerged. A source directly
involved in the matter told Reuters the bid came from India's
two state-controlled oil companies ONGC and Oil India
India, like China, has a pace of growth that is threatening
to outstrip its ability to provide energy to drive it.
CNPC, China's biggest energy company, already has gas and
LNG joint ventures with Shell in Australia, China and Canada.
China is the world's second-largest oil consumer, and its
growing demand for gas is the driver for most new LNG projects
around the world, especially since the shale gas revolution in
the United States wiped out U.S. import demand.
Thursday's deal also demonstrated China's determination to
shift to cleaner burning gas as a transport fuel in an
initiative that could cut its oil consumption by a tenth.
In a connected move, Eni said it also signed a joint study
agreement with CNPC to develop the Rongchang onshore shale gas
block in China, joining Shell among international players there.
China has huge shale resources, possibly bigger than those
of the United States, but they are still a long way from being
developed in any meaningful way.
The block covers about 2,000 square km (770 square miles) in
the Sichuan Basin, close to the main consumption markets in
"The Rongchang block is the best area in China. We think it
has reserves of 6-10 tcf," said Claudio Descalzi, Eni's head of
exploration and production.
Eni already has shale gas agreements in countries including
Poland, Ukraine Vietnam and the United States as well as a shale
agreement with China's Sinopec.
Scaroni said he could not give any numbers on the shale gas
deal with CNPC but that all his rivals would have wanted to sign
"These are maybe just two steps in a future alliance, which
might have other new steps ... We don't look at it as a deal; we
look at it as a strategic alliance between CNPC and Eni," he
(Writing by Andrew Callus, additional reporting by Sarah Young
in London, Agnieszka Flak in Johannesburg and Prashant Mehra in
Mumbai; editing by Ben Hirschler and Jane Baird)