Rosneft to buy Eni stake in Zohr gas field off Egypt

Above, Rosneft's headquarters in Moscow. Russia’s biggest oil producer has an option to increase its Zohr stake to 35 per cent under the same terms. Maxim Shipenkov / EPA

Italy’s Eni has agreed to sell the Russian state-run company Rosneft up to a 35 per cent stake in an oil concession in Egypt that contains the giant Zohr field, the biggest gas discovery in the Mediterranean Sea.

Rosneft will pay US$1.125 billion for a 30 per cent stake and also pay a further $450 million reimbursement for past expenditures, Eni said on Monday.

Russia’s biggest oil producer has an option to increase the stake to 35 per cent under the same terms, Eni said.

Rosneft joins BP, which agreed last month to buy a 10 per cent stake in the concession for $375m. BP also has an option to raise its stake to 15 per cent before the end of next year under the same terms.

Eni expects to pump the first gas from the offshore field, which was discovered in August last year, by the end of next year.

The field has the potential of 30 trillion cubic feet of gas.

The Zohr gas discovery is expected to begin production next year at 1 billion cubic feet (bcf) per day, ramping up annually until it reaches 2.7bcf a day at the start of 2019, Tarek El Molla, Egypt’s oil minister, said last month.

The first phase of the project that will have gas hitting the market next year will cost a third of the total $12bn for the first three years. Afterwards, more investment may be needed to maintain production, Mr El Molla said.

The field is expected to help the country become self-sufficient in gas by 2021, the minister said. The country, which used to export gas, expects to resume exports of the fuel after 2021.

Egypt, which used to be an energy exporter, began importing liquefied natural gas (LNG) last year to meet rising domestic demand, which increased by an annual average of 7 per cent in the 10 years to 2013, according to the US Energy Information Administration.

LNG is gas cooled to a liquid to be transported by ship.

Rosneft, in which BP holds a 19.75 per cent stake, is seeking investments in projects outside its home turf.

In October, Rosneft led a consortium that bought 98 per cent of India’s Essar Oil, the refining unit of the Essar Group, owned by the Ruia brothers.

The acquisition in Egypt comes after last week’s $11bn deal under which the Russian government agreed to sell a 19.5 per cent stake in Rosneft to Swiss trader Glencore and the Qatar Investment Authority, the Arabian Gulf state’s sovereign wealth fund.

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