Italian oil firm Eni has approached banks for billions of dollars to finance a huge offshore gas development in Mozambique, a significant step in getting a long-delayed project off the ground, the company and sources said.
Eni confirmed it met bankers in London last week about project financing to develop the Coral field, part of the huge reserves discovered six years ago in the Area 4 concession off the Mozambican coast.
“It’s running into billions of dollars,” one source familiar with the financing told Reuters, adding banks were also looking for credit guarantees from foreign governments, including Britain and China.
Banks are likely to respond within three to four weeks with terms of loans they are willing to provide, one of the last stages before Eni can make a final investment decision (FID) on the project, two sources close to the deal said.
Eni said it hoped to announce a FID by the end of this year.
Some lenders may be concerned about involvement in a project in Mozambique, given recent clashes between opposition guerrillas and government forces and financial scandals.
The International Monetary Fund (IMF) is in Mozambique this week to try to restore trust between President Filipe Nyusi’s government and international lenders after more than $2 billion in secret loans came to light this year.
The IMF has suspended its own lending to the southeast African country, insisting on external scrutiny as a precursor to resuming financial aid.
“The biggest challenge is Mozambique country risk,” one of the sources said.
Reserves discovered in Mozambique’s Rovuma Basin in recent years amount to some 85 trillion cubic feet, one of the largest finds in a decade and enough to supply Germany, Britain, France and Italy for nearly two decades.
The gas offers Mozambique an opportunity to transform itself from one of the world’s poorest countries into a middle-income state and a major global liquefied natural gas (LNG) exporter.
Negotiations with operators Eni and U.S. firm Anadarko have dragged on for years due to disputes over terms and concerns about falling energy prices.
However, there have been several signs of significant progress in recent months.
Eni has struck a deal with Samsung Heavy to provide a floating LNG platform to process the gas from the Coral field, which will be sold to BP.
Eni has also wrapped up long-running talks to sell a multi-billion dollar stake in other fields in Area 4 to Exxon Mobil, sources told Reuters last month.
In 2013, Eni sold 20 percent of its Area 4 licence to China’s CNPC for $4.2 billion but since then oil and gas prices have come down by more than half.
Anadarko’s $24 billion onshore LNG project is expected to lag Eni’s and its FID is unlikely this year.