Italy's oil and gas major Eni SpA (NYSE:E) approved on Friday the investment plan for the first phase of development of the Coral gas discovery in deep waters offshore Mozambique, with the first-phase investment estimated at US$8 billion.
The Coral South project entails the construction of six subsea wells connected to a floating production facility FLNG (Floating Liquefied Natural Gas), with a liquefaction capacity of over 3.3 million tons of liquefied natural gas (LNG) per year, equivalent to around 5 billion cubic meters.
The whole Coral field, located in Area 4, is estimated to contain about 16 trillion cubic feet of gas in place, according to Eni.
Mozambique's government had approved Eni's development plan for Coral in February of this year.
Now that Eni has approved the investment plan, the project is awaiting the final investment decision (FID), expected to come into effect once all partners of the Area 4 concession approve it and once the project financing is secured.
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Eni is operator of Area 4 with a 50-percent indirect stake. Eni's subsidiary Eni East Africa (EEA) owns 70 percent in Area 4, with the other concessionaires, Galp Energia, KOGAS, and Empresa Nacional de Hidrocarbonetos (ENH), each holding 10 percent.
Last month, Eni and its partners in the project signed a binding agreement to sell - for a period of 20 years - all LNG volumes that the Coral South Floating LNG facility would produce to BP Poseidon Ltd, a wholly-owned subsidiary of BP (NYSE:BP).
Eni has been struggling with the low oil prices, like many other majors, and is cutting capital expenditure. The Italian group confirmed last month its target to reduce capex by around 20 percent this year compared to last year "in order to cope with the slump in crude oil prices".
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More