March 31, 2014 / 3:00 PM / in 4 years

Exclusive: Eni hires BAML to advise on $5 billion Mozambique gas deal - sources

LONDON/MILAN (Reuters) - Italy’s Eni (ENI.MI) has hired Bank of America Merrill Lynch (BAML) (BAC.N) to advise on the sale of a stake of about 15 percent in its Mozambique gas field which could raise up to $5 billion, several sources familiar with the matter said.

The oil and gas firm needs partners to share the huge investment required to develop the large Mozambique project. It sold 20 percent of its Mozambique offshore gas acreage to China’s CNPC last year in a deal worth around $4.2 billion.

Eni and BAML declined to comment.

Eni plans to make approximately 56.8 billion euros ($78.11 billion)of investments over the 2013-2016 period, an increase of approximately 1.6 billion euros over the last plan period. The increase is largely related to the new growth opportunities in exploration and production (E&P), including Mozambique.

The Italian firm said it would increase payouts to investors and would fund it through a cut in capital expenditure and a 9 billion euro disposal plan over four years.

Asian investors are again expected to dominate the process as they are cash-rich and keen to secure resources. They are also comfortable investing in projects that they do not operate, unlike most of their Western peers, bankers said. Eni operates the Area 4 in Mozambique’s northern Rovuma basin.

Bankers see China’s CNOOC as the most likely buyer because it is keen to build up a liquefied natural gas (LNG) business.

    “It should go to the Chinese since they’re the only ones with the fire power ... Going by exclusion, if CNPC bought the last stake I presume this time it could be Sinopec or CNOOC,” said one banker.

    Japanese trading houses like Sumitomo (8053.T) and Asian utilities like Tokyo Gas (9531.T) could also be interested as they seek to grow outside their home market, one of the bankers said. Singapore’s Temasek TEM.UL could also join a consortium of bidders as they recently did in Tanzania, said the person.

    Western oil majors such as Shell, Total, Chevron are unlikely to be interested as they tend to prefer operating projects themselves rather than being silent financing partners, several bankers said. ($1 = 0.7271 Euros)

    Reporting by Sophie Sassard in London and Stephen Jewkes in Milan; Editing by Anjuli Davies and David Evans

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