Eni (MI:ENI) is in talks to grow its footprint in Oman and the United Arab Emirates as part of plans to build its asset base in the oil-rich Gulf and offset its reliance on Africa, a source close to the matter said. The international oil company has a limited presence in the Middle East, where some of the world’s biggest oil and gas reserves lie, producing more than half its output in Africa.
“Eni is in talks with Oman for various opportunities,” the source told Reuters, adding recent geopolitical tensions in the area had not curbed its interest. Last year Eni sealed its first deal in Oman, winning a majority stake in offshore acreage and selling on part to Qatar Petroleum.
This year it took a first step into Abu Dhabi, paying $875 million for stakes in two oil concessions and then buying part of the giant Ghasa gas field from state oil group Adnoc. The source said Eni had submitted an expression of interest for a minority stake in Adnoc’s refinery business, confirming an earlier Reuters report.
Abu Dhabi has put on sale 40 percent of Adnoc’s refining unit valued at $8 billion but will never sell to a single company, the source said, adding many others were interested including Chinese and Indian firms and France’s Total (PA:TOTF).
“Eni is also interested in other downstream opportunities,” the source said, pointing to Adnoc’s ambitions in that area. Last year Adnoc presented a 2030 strategy plan to open up its energy markets to foreign operators and attract the skills needed to develop E&P, refining and petrochemical industries.
Thanks to bumper natural gas discoveries in Mozambique’s Mamba field and Egypt’s Zohr, Eni has one of the strongest discovery records in the industry and one of the fastest time to market records. “Getting into refining would give Eni a natural hedge to all its upstream business as well as allowing it to diversify away from Africa,” said Santander (MC:SAN) oil analyst Jason Kenney.
Sources have also told Reuters Eni is in the race to get into Qatar’s plans to expand its liquefied natural gas industry, saying teaming up with Qatar Petroleum in Mexico was a preparatory move.
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More News and Analysis On Natural Gas
The U.S. Energy Department‘s weekly inventory release showed a smaller-than-expected decrease in natural gas supplies. While prices fell slightly following the lower inventory drawdown, the fuel remains buoyed with forecasts of colder-than-normal weather in the face of relative deficit in inventories for this time of year. Having hit a a four-year high of $4.837 per MMBtu recently, there is potential for further price gains with bulk of the winter heating season still to come.
Stockpiles held in underground storage in the lower 48 states fell by 59 billion cubic feet (Bcf) for the week ended Nov 23, below the guidance (of 73 Bcf decline) as per the analysts surveyed by S&P Global (NYSE:SPGI) Platts. However, the decrease was higher than both the five-year (2013-2017) net shrinkage of 49 Bcf and last year’s drop of 35 Bcf for the reported week.
Following past week’s supply decline, the current storage remains well below benchmarks. At 3.054 trillion cubic feet (Tcf), natural gas inventories are 720 Bcf (19.1%) under the five-year average and 644 Bcf (17.4%) below the year-ago figure.
Fundamentally speaking, total supply of natural gas averaged around 92.9 Bcf per day, up slightly on a weekly basis as production and Canadian imports edged up. Meanwhile, daily consumption remained essentially unchanged at 84.2 Bcf.
Natural Gas Up More than 50% So Far This Year. As a result of the headline miss, natural gas prices lost 1.1% yesterday to settle at $4.646 per MMBtu. Despite the temporary blip, the fuel’s demand-supply situation remains favorable. In fact, prices are up around 55% year-to-date on cold weather demand and slumping supplies, in the process hitting their highest levels since November 2014.
Natural gas recently broke the $4 per MMBtu mark for the first time in four years with cooler weather conditions resulting in strong demand for the heating fuel. Despite skyrocketing production, natural gas entered the winter season with stockpiles at their lowest in 15 years. If the current (2018-2019) winter turns out to be colder than normal, the surge in expected demand — in the face of relative deficit of natural gas inventory — could trigger a bigger rally in the commodity’s price.
The fundamentals of natural gas continue to be favorable in the long run, considering the secular shift to the cleaner burning fuel for power generation globally and in the Asia-Pacific region in particular.
The EIA predicts global demand for the commodity to grow 43% from 2015 to 2040. Countries in Asia and in the Middle East – led by China’s transition away from coal – will account for most of this increase. The replacement of coal-fired power plants and higher consumption from industrial projects have also contributed to the strength in natural gas demand.
Want to Own Natural Gas Stocks?. The secular tailwinds mentioned above could see natural gas eventually settle above the $5 per MMBtu mark before the end of the winter. This augurs well for natural gas-heavy upstream companies like Gulfport Energy Corporation (NASDAQ:GPOR) , Antero Resources (NYSE:AR) , Cabot Oil & Gas Corporation (NYSE:COG) , QEP Resources Inc. (NYSE:QEP) and SilverBow Resources, Inc. (NYSE:SBOW) .