Total buys Engie’s upstream LNG business for $1.5 billion
French oil major Total has signed a deal with its compatriot Engie to buy Engie's of upstream liquefied natural gas (LNG) business for $1.49 billion.
This portfolio includes participating interests in liquefaction plants, notably the interest in the Cameron LNG project in the US, long term LNG sales and purchase agreements, an LNG tanker fleet as well as access to regasification capacities in Europe. Additional payments of up to $ 550 million could be payable by Total in case of an improvement in the oil markets in the coming years.
Patrick Pouyanné, Chairman & Chief Executive Officer of Total said: “The acquisition of Engie's upstream LNG business enables Total to accelerate the implementation of its strategy to integrate along the full gas value chain, in an LNG market growing strongly at 5% to 6% per year. The combination of these two complementary portfolios will allow the Group to manage an overall volume of around 40 million tonnes of LNG per year by 2020, making Total the second largest global player among the majors with a worldwide market share of 10%.”
He added: “With the equity stake in the Cameron LNG project, Total will also become an integrated player in the US LNG market, where the Group is already a gas producer.”
As part of the transaction, Titak will get 2.5 MTPA of liquefaction capacity, bringing Total's existing portfolio to 23 MTPA by 2020.
Total will get 16.6% equity stake in the Cameron LNG liquefaction plant with 3 trains currently under construction in Louisiana and the potential to expand by adding two further trains and a 5% equity stake in the first train of the Idku LNG project in Egypt.
The deal will bring Total a fleet of 10 LNG tankers which will be consolidated with the 3 LNG carriers of Total.
Furthermore, Total will take ownership of a portfolio of long-term LNG purchase and sale contracts, enabling the Group in increase its overall portfolio to 28 MTPA by 2020, with a diversified supply from Algeria, Nigeria, Norway, Russia, Qatar and the USA, and outlets balanced between Europe and Asia.
It will also get the access to regasification capacities of 14 MTPA in Europe, which, combined with the existing 4 MTPA of Total, allows the Group to balance its consolidated purchase and sales portfolio. The deal will bring Total a fleet of 10 LNG tankers which will be consolidated with the 3 LNG carriers of Total.
Overall, combining its interests in liquefaction plants and its portfolio of third party supply contracts, the Group will manage a global volume of nearly 40 MTPA, Total said.
The proposed transaction is subject to the applicable legally required consultation and notification processes with employee representatives as well as approvals by the relevant regulatory authorities and partners on certain contracts. The transaction is expected to close by mid 2018 and will have an effective date of 1st January 2018.
Following the transaction, Total will take over the teams in charge of the LNG activities at Engie, which represents around 180 employees.
In addition, in parallel with this transaction, Total and Engie agreed to cooperate to promote the use of biogas and renewable hydrogen, with Engie becoming Total's priority supplier in this field.
The agreement, announced on Wednesday afternoon, follows an October announcement by Engie, which then said it had launched a strategic review of its upstream and midstream LNG activities, but not the downstream.
E&P sold too
To remind, Engie in May this year received a takeover offer from Neptune for its oil and gas exploration and production business.
Neptune, an investment firm established in 2015 by an ex-Centrica boss Sam Laidlaw, offered to buy Engie's 70% interest in Exploration & Production International (“EPI”) for an aggregate value of €4.7 billion (at 100%, including €1.1 billion in decommissioning liabilities deconsolidated from ENGIE's balance sheet).
Based on the offer, Engie in May entered into exclusive negotiations with Neptune Energy. The completion of the transaction for the E&P business is expected in the first quarter of 2018.