ENI to pay US$350 million capital gains tax

Login

Register

http://www.clubofmozambique.com/

ENI to pay US$350 million capital gains tax

11:47 CAT | 22 Mar 2017

The Italian energy company ENI is to pay 350 million US dollars in capital gains tax to the Mozambican government following its sale of a stake in a gas field to US giant ExxonMobil.

On 9 March, ENI announced a sale and purchase agreement with the ExxonMobil, under which ExxonMobil will pay 2.8 billion US dollars for a 25 per cent stake in offshore Area Four in the Rovuma Basin in northern Mozambique.

Speaking on behalf of the Mozambican Tax Authority (AT) following a meeting with ENI, Anibal Mbalango explained, “on the basis of available information supplied by ENI, the tax due will be approximately 350 million dollars”.

Mbalango added that the sale still requires approval by the Mozambican authorities and the other partners in the Area Four consortium. Following that approval, ENI will have thirty days to pay the tax.

Currently, ENI controls a 50 per cent indirect interest in Offshore Area Four, owned through ENI-East Africa, which holds 70 per cent of the concession. The remaining 20 per cent held via ENI-East Africa belongs to the Chinese company CNPC. The other three partners, with ten per cent each, are Galp Energia of Portugal, Kogas, and Mozambique’s National Hydrocarbon Company (ENH).

The total gas discovered so far in Area Four is 85 trillion cubic feet. Plans are in an advanced stage to set up a floating liquefied natural gas (FLNG) facility in the Coral South gas field. So far, the consortium has invested about 2.8 billion US dollars in Area Four, and it is estimated that the FLNG project will cost a further eight billion dollars.

An agreement has already been reached under which all the gas produced from the FLNG plant will be sold to the
British company BP over a twenty year period.

Production of LNG is due to begin in 2022. However, the Final Investment Decision cannot take place until CNPC formerly commits itself to the investment (all the other partners have now approved their share of the investment).

Under the deal with ExxonMobil, ENI will continue to lead the FLNG project whilst ExxonMobil will lead the construction of onshore liquefaction facilities.

Neighbouring Area One, where the US company Anadarko is the operator, holds an estimated 75 trillion cubic feet of gas. Anadarko is planning to build an onshore LNG facility to produce 12 million tonnes of LNG a year. Later it hopes to raise production to 20 million tonnes a year. However, given the expense and complexity of the project, some analysts expect that ExxonMobil will eventually also take a large stake in Area One.

Source: AIM