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    ENI   IT0003132476

ENI S.P.A.

(ENI)
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Exclusive-Energy majors bid for Qatar LNG project despite lower returns

06/13/2021 | 06:54pm EDT
FILE PHOTO: The logo of Qatar Petroleum is seen at its headquartes in Doha

LONDON (Reuters) - Six top western energy firms are vying to partner in the vast expansion of Qatar's liquefied natural gas output, industry sources said, helping the Gulf state cement its position as the leading LNG producer while several large projects around the world recently stalled.

Exxon Mobil, Royal Dutch Shell, TotalEnergies and ConocoPhillips, which are part of Qatar's existing LNG production were joined by new entrants Chevron and Italy's Eni in submitting bids on May 24 for the expansion project, industry sources told Reuters.

The bids show energy giants continue to have appetite for investing in competitive oil and gas projects despite growing government, investor and activist pressure on the sector to tackle greenhouse gas emissions.

Unlike Qatar's early LNG projects in the 1990s and 2000s when the country relied heavily on international oil companies' technical expertise and deep pockets, the country's national oil company Qatar Petroleum (QP) has gone ahead alone with the development of the nearly $30 billion North Field expansion project.

It is, however, seeking to partner with the oil majors in order to share the financial risk of the development and help sell the additional volumes of LNG it will produce.

"I don't think QP need the IOCs expertise in the upstream or midstream construction of the project but they will be glad to see someone take some LNG volumes off their hands," a senior source in one of the bidding companies said.

Qatar plans to grow its LNG output by 40% to 110 million tonnes per annum (mtpa) by 2026, strengthening its position as the world leading exporter of the super-chilled fuel.

An Eni spokesperson confirmed the company is participating in the bidding process. QP, Shell, Chevron, TotalEnergies, Conoco declined to comment.

Exxon said it did not comment on market rumours, but added: "We look forward to continuing success in future projects with our partners Qatar Petroleum and the State of Qatar. ExxonMobil affiliates are working with Qatar Petroleum to identify international joint venture opportunities that further enhance the portfolio of both."

Leading energy companies see natural gas as a key fuel in the world's efforts to cut carbon emissions and replace the more polluting coal, although the International Energy Agency said in a report last month that investments in new fossil fuel projects should stop immediately in order to meet U.N.-backed targets aimed at limiting global warming.

Activists say that expansion in natural gas delays a transition to renewable energy that is needed to meet U.N.-backed targets to battle climate change. The European Union is in the midst of a debate about what role gas should take in the energy transition.

The outlook for global LNG supplies tightened sharply in recent months after Total suspended its $20 billion LNG project in Mozambique due to a surge in violence.

It followed a string of delays of LNG projects in North America as COVID-19 hobbled demand last year.

Global LNG demand has increased every year since 2012 and hit record highs every year since 2015 mostly due to fast-rising demand in Asia. Analysts have said they expect global LNG demand will grow about 3-5% each year between 2021 and 2025.

LOWER RETURNS

The interest from companies in the Qatari expansion comes despite relatively low returns.

QP offered international bidders returns of around 8% to 10% on their investment, down from around 15% to 20% returns Exxon, Total, Shell and Conoco have seen from the early LNG facilities, according to sources in three companies involved.

Qatar project returns have never previously been disclosed. 

The six companies and QP declined to comment on the terms of the bids.

"Clearly Qatar has become more competitive," a source said. "But it remains very low risk from the resource perspective."

The results of the tender process are not expected to be announced before September, two of the sources said.

In March, QP said it will take full ownership of Qatargas 1 LNG plant when its 25-year contract with international investors including Exxon and TotalEnergies expires next year, in a sign of its growing confidence.

Qatar is also in talks to make Chinese firms partners in the project, sources told Reuters last month.

QP last month hired international banks for a multi-billion dollar debut public bond sale by the end of June, two sources said, to help in part development the Northern Field project.

(Reporting by Ron Bousso and Dmitry Zhdannikov; additional reporting by Jennifer Hiller in Houston, Benjamin Mallet in Paris;Editing by Elaine Hardcastle)

By Ron Bousso and Dmitry Zhdannikov


ę Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
CHEVRON CORPORATION 0.64% 102.485 Delayed Quote.20.56%
CONOCOPHILLIPS 0.17% 56.135 Delayed Quote.40.19%
ENI S.P.A. -0.52% 9.972 Delayed Quote.17.27%
EXXON MOBIL CORPORATION 0.71% 57.97 Delayed Quote.39.67%
ISTOXX FP GR DEC 2.54 (EUR) -0.08% 36.95 Delayed Quote.0.00%
LONDON BRENT OIL -2.98% 72.88 Delayed Quote.45.28%
QATAR GAS TRANSPORT COMPANY LIMITED (NAKILAT) (QPSC) 1.09% 3.048 End-of-day quote.-4.15%
ROYAL DUTCH SHELL PLC 0.39% 17.158 Real-time Quote.16.96%
S&P GSCI NATURAL GAS INDEX 0.43% 184.0528 Delayed Quote.54.16%
TOTALENERGIES SE -0.03% 36.69 Real-time Quote.3.97%
WTI -3.38% 71.215 Delayed Quote.52.09%
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Financials
Sales 2021 64 506 M 76 586 M 76 586 M
Net income 2021 2 755 M 3 271 M 3 271 M
Net Debt 2021 16 906 M 20 072 M 20 072 M
P/E ratio 2021 13,0x
Yield 2021 7,77%
Capitalization 35 625 M 42 341 M 42 297 M
EV / Sales 2021 0,81x
EV / Sales 2022 0,75x
Nbr of Employees 31 495
Free-Float 67,8%
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Eni S.p.A. Technical Analysis Chart | ENI | IT0003132476 | MarketScreener
Technical analysis trends ENI S.P.A.
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Income Statement Evolution
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Mean consensus OUTPERFORM
Number of Analysts 24
Last Close Price 10,02 €
Average target price 11,71 €
Spread / Average Target 16,8%
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Managers and Directors
Claudio Descalzi Chief Executive Officer, Director & GM
Francesco Gattei Chief Financial Officer
Lucia Calvosa Chairman
Francesca Zarri Director-Technology, Digital, R&D
Giuseppe Ricci Chief Operating Officer-Energy Evolution
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