Rosneft to pay $2.8 billion to join Egyptian gas block

Bloomberg

Rosneft PJSC agreed to pay as much as $2.8 billion to buy up to 35 percent of a natural-gas project off Egypt, joining Eni SpA and BP Plc in the largest discovery in the Mediterranean Sea.
Rosneft will pay $1.13 billion for an initial 30 percent stake in the Shorouk concession, which includes the Zohr find, plus $450 million for past expenditures, Eni said in a statement on Monday. The Russian state-controlled energy producer has an option until the end of 2017 to acquire an additional 5 percent, which would also require payments for past spending, Eni said.
The price “is reasonable for
big fields in an attractive location,” according to Ildar Davletshin.
an oil and gas analyst at Renaissance Capital.
Rosneft, which pumps more than 40 percent of Russia’s crude and over 10 percent of its gas, has planned to expand its gas business for years. It has been seeking assets and contracts overseas, while at home challenging the piped-gas export monopoly of state-run giant Gazprom PJSC. In May, Rosneft supplied its first liquefied natural gas cargo to Egypt.
Rosneft shares climbed 0.7 percent to 373.50 rubles as of 1.05 p.m. in Moscow, bringing this year’s gain to 48 percent. Eni rose 3.5 percent in Rome, making it the third-best performer on the 20-company STOXX Europe 600 Oil & Gas Index.
The acquisition comes after last week’s $11 billion deal under which Glencore Plc and the Qatar Investment Authority agreed to buy a 19.5 percent stake in Rosneft from the Russian government.
The Egyptian gas project could make sense for a Rosneft venture with Glencore and Qatar’s sovereign wealth fund due to their expertise in natural gas, according to Davletshin.

SPARE MONEY
Rosneft may feel it has some “spare money” as the stake acquisition by Glencore and Qatar means Russia’s biggest oil producer won’t have to finance a buyback of its own shares, another option that was under consideration, according to Alexey Bulgakov, a fixed income analyst at Sberbank CIB.
Egypt has said it will keep all of Zohr’s reserves for domestic
use, allowing the country to cut LNG imports. Eni discovered the field last year, estimating its resources at about 30 trillion cubic feet. It expects the first gas to flow in late 2017.
BP, Rosneft’s largest shareholder after the Russian government, agreed to buy a 10 percent interest in the Zohr field from Eni in November for $375 million. It will also refund some past costs once the deal closes and has an option to purchase a further 5 percent before the end of next year.
Rosneft will get a 15 percent share of a joint venture with IEOC Production BV and Egyptian
Natural Gas Holding Co., which
operate the Shorouk project, according to a filing. It has an option to buy a further 2.5 percent in
the venture.