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Norwegian oil giant Statoil ASA (STO - Analyst Report) has sold its 25% working interest in an exploration license offshore Mozambique to Tullow Oil PLC − an U.K. based oil exploration and production company. However, the parties kept the commercial terms of the deal confidential.

The divested properties comprise two blocks in area 2 and 5, offshore Mozambique in the Rovuma basin, covering 7800 square kilometers. The blocks are located at a water depth of 300 meters to 2,400 meters.

Following the transaction, Statoil will retain its 65% stake in the license and act as the operator. On the other hand, Mozambique’s state run company Empresa Nacional de Hidrocarbonetos (“ENH”) will hold the remaining 10% interest. The first well in the license is scheduled for next year.

This agreement is in sync with the Norwegian company’s exploration strategy of early access in a prolific area with its significant presence, while sharing the geological risk. Of late, major oil and gas companies, like Anadarko Petroleum Corp. (APC - Analyst Report) and Eni SPA (E - Analyst Report), made major gas finds to the north of this acreage.

Statoil has been in the Mozambique region for the past six years and has recently acquired 30% of Tullow’s share in the 2,369 square kilometer deepwater Block 47 in Suriname. Recently, Statoil also discovered a huge gas deposit in the Lavani well on Block 2, off Tanzania.

The company plans to develop its gas find through a liquefied natural gas solution but has not revealed the cost estimate. Per the analysts, the development cost of the project would be around $10 billion.

The initial outcome of the logging proved that the Lavani well holds an estimated recoverable resource of 3 trillion cubic feet (Tcf) of gas. Notably, according to the U.S. Geological Survey, East Africa has an estimated reserve of 253 Tcf of gas off Kenya, Tanzania and Mozambique and is becoming the world’s rapidly growing gas hubs.

However, the region needs proper infrastructural development and hence major energy companies, like Statoil, are expected to financially back the development of a gas liquefaction facility there.

We remain upbeat on Statoil’s long-term production growth profile given its growing upstream presence in the emerging basins of the Barrents Sea, Africa and the deepwater U.S. Gulf of Mexico. We also believe that the growing share of natural gas in Statoil’s Norwegian Continental Shelf volume mix and its extensive interests in infrastructure assets enable it to play a leading role in the European natural gas market.

The company retains a Zacks #2 Rank, which is equivalent to a short-term Buy rating.

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