French gas and oil giant Total has agreed to acquire the compatriot Engie’s portfolio of upstream liquefied natural gas (LNG) assets for $1.49 billion in one of the largest deals in the industry in years.
The two companies said in October that they were in talks over Engie’s LNG business.
“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 percent,” Patrick Pouyanné, chairman & CEO of Total said.
To remind, Shell became the largest global LNG player among the majors after the multi-billion acquisition of the UK-based LNG company BG Group in February last year.
The portfolio Total is taking over from Engie as part of the acquisition 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, the company said.
Engie said in a separate statement that it will keep its downstream activities, including the regasification infrastructures, and LNG retail end-customer sales, as it aims to further accelerate its development in this area.
“This intended transaction demonstrates once again Engie’s ability to deliver on its transformation plan and to improve its risk profile by reducing its exposure to commodity prices. Total is the best placed to secure the future development of liquefaction, shipping and LNG trading employees and activities,” Isabelle Kocher, chief executive of Engie 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 percent to 6 percent per year, according to Pouyanné.
With the equity stake in the Cameron LNG project, Total becomes an integrated player in the US LNG market where it is already a gas producer.
Under the transaction, Total adds 2.5 mtpa of liquefaction capacity to its existing portfolio that will rise to 23 mtpa by 2020.
The company will acquire a portfolio of long-term LNG purchase and sale contracts, enabling it to 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.
Total will also gain 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.
Additionally, Total will buy Engie’s Gazocean unit consolidating a fleet of 10 tankers with three LNG carriers of Total.
The acquisition includes Engie’s international LNG trading operations as well.
The transaction is expected to close by mid-2018 and will have an effective date of 1st January 2018.
LNG World News Staff