BP to Buy LNG From Eni’s Mozambique Field in 20-Year Accord

  • BP to buy entire output from Coral South Floating facility
  • At current LNG prices, deal would be worth $1 billion a year

BP Plc has agreed to buy the entire liquefied natural gas production from a field off Mozambique over a period of 20 years.

The London-based company will purchase cargoes from the Coral South Floating LNG plant being developed by partners including Italy’s Eni SpA, which is due to get final approval by the end of this year, BP said in a statement on Tuesday.

The project is expected to have a capacity of more than 3.3 million tons a year, BP said, without disclosing the commercial terms of the deal. At current prices on the short-term Asian LNG market of about $6 per million British thermal units, the agreement would be worth about $1 billion a year, according to Bloomberg calculations.

"I would suspect they have received pricing terms that they view as profitable for re-sale into their end markets,” because of the current LNG glut, Jason Gammel, an analyst at Jefferies said by phone. “BP and others do offtake incremental volumes because they can make profit trading it.”

As the world moves toward cleaner ways of producing and consuming energy, many major oil companies are increasing their focus on natural gas, which is considered a crucial bridge fuel in the transition to a low-carbon future. Royal Dutch Shell Plc’s $54 billion takeover of BG Group Plc last year was a significant pivot toward gas, giving the company massive LNG projects in Australia.

“The agreement adds to the diversity of our natural gas portfolio beyond the end of the decade, further enhancing our ability to meet the needs of our customers,” Paul Reed, chief executive of BP’s supply and trading business, said in the statement.

Production at Coral will start in late 2021 at the earliest, Filippo Gotti, vice president of LNG Mozambique at Eni Gas & Power, said last month. Eni is the operator of the project, with a stake of about 50 percent held through a subsidiary. China National Petroleum Corp. has an indirect holding of 20 percent, while Portugal’s Galp Energia SGPS SA, Korea Gas Corp. and Mozambique’s Empresa Nacional de Hidrocarbonetos each have 10 percent.

— With assistance by Rob Verdonck, and Anna Shiryaevskaya

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE