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Italian energy giant Eni SpA (E - Analyst Report) has farmed in two exploration blocks, in the Song Hong and Phu Khanh basins in the Gulf of Tonkin, offshore Vietnam -- an emerging southeast Asian market.

Eni’s wholly owned subsidiary, Eni Vietnam, has acquired a 50% interest in Block 105-110/4 and Block 120 from Australia's Neon Energy Ltd. and Singapore-based KrisEnergy Ltd. Both Neon and KrisEnergy have sold their 25% stakes to Eni. Subsequent to the farm out, Eni will hold 50%, while Neon and KrisEnergy will hold 25% each, in both the blocks.

Eni, in return has agreed to fund the expenses for gathering 800 square kilometers of 3D seismic in Block 105 and a 155 mile (250 square kilometer) shoot over Block 120.

Per market sources, Eni will be responsible for performing the initial technical job and pay the full cost of the first exploration well in each of the two blocks. The drilling time of the wells, expected to start after the seismic tests and rig availability, has not been disclosed.

Spanning across 5,262 miles (8,469 square kilometers) in Vietnam’s offshore Phu Khanh basin, Block 120 is identified as having 12 oil leads with prospective resources of 633 million to 7.9 billion barrels.

Block 105 spreads over 4,468 miles (7192 square kilometers) in the Song Hong basin, off north-central Vietnam, and it is estimated to comprise seven gas and condensate leads with risk-free prospective gas in the range of 1.7 trillion to 21.4 trillion cubic feet.

The government of Vietnam is offering investment incentives to foreign companies capable of drilling offshore and to those keen on sharing technology with state-owned PetroVietnam, which lacks these capabilities.

Vietnam is on the threshold of becoming the next exploration hub in Asia. The region’s focus on finding commercial oil and gas would aid in meeting future energy demands. The companies holding in the high quality exploration blocks with immense potential that remain largely unexplored bode well going forward.

Eni, which faces competitive threats from Statoil ASA (STO - Analyst Report), holds a Zacks #3 Rank that translates into a Hold rating for a period of one to three months. Longer term, we maintain our Neutral recommendation on the stock.

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