Eni to sell 30% stake in Egyptian field to Rosneft

Italian energy company Eni has agreed to sell a 30 percent stake in a giant Egyptian offshore gas field to Russia’s Rosneft for $1.575 billion, pressing ahead with asset sales to fund investment amid weak oil prices. Eni, which currently owns 90 percent of the Shorouk concession containing the giant Zohr gas field, said Rosneft would pay $1.125 billion cash for the stake and would reimburse investments already carried out by Eni for around $450 million.

Rosneft also has an option to buy a further 5 percent stake. Selling down stakes in oil and gas fields it operates is part of Eni’s so-called “dual exploration” strategy to raise cash to fund future development and support dividends. In the last four years, Eni has raised about $6.3 billion in this way.

Eni, whose cash flow fell 19 percent in the third quarter due to low oil prices, has pledged to sell 5 billion euros of assets in the next two years. Zohr, discovered by Eni in 2015, is the biggest gas field ever found in the Mediterranean with an estimated 850 billion cubic metres of gas in place.

The approval process for development of the field was completed in February and first gas is expected by the end of 2017. In November, Eni Chief Executive Claudio Descalzi said he wanted to cut the firm’s stake in Zohr to 50 percent. Back then the state-controlled major sold a 10 percent stake in Zohr to BP for a total of $525 million, granting BP an option to buy another 5 percent before the end of the year. BP holds 19.75 percent of Rosneft and the two companies have traditionally had close relations.

Eni, which has partnerships with BP in Egypt, signed a joint venture agreement with Rosneft back in 2012 to develop offshore projects in Russia in areas like the Barents and Black Seas. The Russian energy conglomerate, led by Igor Sechin, said earlier this month its board planned to discuss buying a stake of up to 35 percent in Shorouk.

The deal marks another step in Rosneft’s global expansion drive after it bought into India’s Essar Group in October. —Reuters