BP and Rosneft buy in to Eni's flagship Zohr development for $2.1 billion

BP is acquiring 10% and Rosneft 30%. The two deals were announced separately, two weeks apart, but are being done on exactly the same terms. Eni discovered Zohr in August 2015, and has been negotiating with potential farm-in partners ever since. This is a very attractive project. Zohr holds up to 30 tcf of lean gas in place, making it one of the largest ever gas discoveries in the Mediterranean. The development is of huge strategic importance to both Eni and the Egyptian government, and is being fast tracked: FID and government approval were received in early 2016. Eni is targeting first gas in late 2017, quickly ramping up to a plateau of 2.7 bcf/d in 2019. Even under our more conservative modelling assumptions (start-up Q1 2018; plateau of 2.5 bcf/d from 2021), we calculate that the project generates a full cycle IRR of 16%. Deal economics look good.