Italian energy major
) intends to farm in to gas exploration block 114 in the Song Hong
basin, offshore Vietnam -- a promising southeast Asian market.
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Earlier, exploration block 114 was fully held by India-focused
integrated energy firm Essar Energy Plc, which had a
production-sharing contract on the block since 2010. Eni has inked
a contract with Essar to procure a 50% stake in the block and has
also acquired the operatorship of the block, simultaneously.
Per the agreement, which still awaits Vietnamese government
approval, Eni will be responsible for the purchase of a 3D seismic
survey along with the spudding of two wells. Essar took Eni as a
partner, as it was having trouble arranging additional outlays
required to commence gas production. The London-listed company also
intended to share the risk as well as focus on growing its core
Block 114 spreads over 5,900 square kilometers in the Song Hong
basin -- an area considered to be resource rich, as has been proved
by considerable exploration successes in nearby blocks.
The current agreement reinforces Eni's strategy of expanding in the
Far East regions, having large mineral deposits. In June 2012,
Eni's wholly owned subsidiary, Eni Vietnam, had acquired a 50%
interest in Block 105-110/4 and Block 120 from Australia's Neon
Energy Ltd. and Singapore-based KrisEnergy Ltd.
The government of Vietnam is offering investment incentives to
foreign companies capable of drilling offshore, and to those keen
on sharing technology with state-owned PetroVietnam, which lacks
Vietnam is on the threshold of becoming the next exploration hub in
Asia. The region's focus on finding commercial oil and gas would
aid in meeting future energy demands. The company's holdings in the
high quality exploration blocks with immense potential that remain
largely unexplored bode well going forward.
Eni, which faces competitive threats from
), holds a Zacks #3 Rank that translates into a Hold rating for a
period of one to three months. Longer term, we maintain our Neutral
recommendation on the stock.