Industry Trend Analysis - Quick View: Eni Swaps Zohr Stake For Low-Cost Oil - APR 2018

The Latest: Eni has agreed to sell to Mubadala Petroleum, a wholly owned subsidiary of Mubadala Investment Company, a 10% stake in the Shorouk concession, offshore Egypt, where the Zohr super-giant gas field is located. The company will pay USD934 million, following confirmation by the Egyptian authorities. Eni, through its subsidiary IEOC, currently holds a 60% stake, while the other partners are Rosneft with 30% and BP with 10%.

Implications: For the Mubadala Investment Company, one of several proxy sovereign wealth funds in Abu Dhabi, the deal will grant access to cash flow currently being generated by the Zohr project. The field, which was brought online in December 2017, is currently producing around 400 million cubic feet of natural gas daily and will ramp up production further throughout this year. Conversely, Eni now has access to the significant potential in the UAE offshore, with the concession's combined production targets at 910,000b/d in total. For the developers offshore UAE, the entry of Eni will provide expertise, capital and technological knowledge to aid with the projects.

For Eni, the Zohr deal also marks further monetisation of its development. In addition to previous deals with Rosneft and BP, the latest transaction means a total divestment of 50% of its offshore concession has yielded around USD2.88 billion to the company. Eni retains the remaining 50% stake and operatorship. In a closely related deal, Eni invested USD875mn in two offshore concessions in Abu Dhabi, acquiring a 5% stake in the Lower Zakum offshore oil field and a 10% stake in the oil, condensate and gas offshore fields of Umm Shaif and Nasr. This will enlarge Eni's low-cost oil portfolio.

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