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Eni & Partners Ink Deal to Expand LNG Production in Nigeria

Zacks Equity Research

Eni S.p.A. E recently signed an expansion pact with its partners at the Bonny LNG plant in Nigeria. The $10-billion deal was inked to construct the Train 7 project, which received a final investment decision.

The project, which can boost Nigeria’s annual LNG production capacity from 22.5 million metric tons (MT) to 30 million MT, is expected to commence in 2024. While the new liquefication Train 7 can ramp up LNG production by 4.2 million MT per annum, an additional 3.4 million MT capacity will come from debottlenecking the existing trains.

The strategic LNG expansion move is expected to benefit Nigeria, which has more than 200 trillion cubic feet of proven gas reserves, by reducing the country’s dependency on oil revenues. With a volatile oil price environment, Nigeria’s decision to diversify its revenue sources is commendable. Moreover, production growth will likely offset this African nation’s declining LNG output, which pulled it down to the fifth spot among the world’s top LNG producers.

Currently, Nigeria Liquefied Natural Gas (NLNG) exports approximately 300 LNG cargoes per annum from the Bonny plant, which constitutes around 40% of global LNG supplies. Per reports, the Train 7 at the site can generate $20 billion worth of revenues for the local government alongside 10,000 and 40,000 direct and indirect jobs, respectively. Moreover, the plant is expected to expand to 12 trains in a few years’ time.

Eni has Royal Dutch Shell plc RDS.A, TOTAL S.A. TOT and Nigerian National Petroleum Corporation (NNPC) as partners in the NLNG domain. While operator NNPC has 49% stake in NLNG, Eni, Shell and TOTAL have 10.4%, 25.6% and 15% interests, respectively.

Price Performance

Eni’s shares have slipped 0.9% in the past year compared with 0.3% fall of the industry it belongs to.

Zacks Rank and Stock to Consider

Currently, Eni carries a Zacks Rank #3 (Hold). A better-ranked stock in the energy sector is YPF Sociedad Anonima YPF, which has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

YPF’s bottom line for the current year has witnessed two upward and one downward estimate revisions.

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Royal Dutch Shell PLC (RDS.A) : Free Stock Analysis Report
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