TOTAL S.A. (TOT - Free Report) announced that it has signed a Letter of Intent (LOI) with Royal Dutch Shell plc (RDS.A - Free Report) for the sale of its 26% minority equity stake in Hazira LNG regasification terminal in India. The company continues to work on its strategy to divest non-core assets and utilize the proceeds to focus on its core operations. In the first half of 2018, TOTAL disposed assets amounting to $2,862 million.
TOTAL also signed an agreement to sell 0.5 million tons of liquefied natural gas (LNG - Free Report) per year to Shell over 5 years, which will be utilized by the latter to supply to the markets of India and neighboring countries. TOTAL will source the LNG from its global portfolio and expects to supply the LNG from 2019.
LNG Industry and TOTAL
TOTAL continues to expand its footprint in the fast-growing global LNG industry through acquisitions. Last month, the company completed the acquisition of Engie’s LNG business, making TOTAL the second-largest operator of LNG on a global scale.
TOTAL is expected to manage an overall LNG portfolio of around 40 million tons (MT) per year by 2020. TOTAL already has a worldwide LNG trading contracts portfolio of 28 MT/year to supply each LNG market with competitive and flexible resources. This new contract with Shell will further expand its LNG market globally.
India Can be the Next Big LNG Market
Per The Economic Times release, India imports nearly 45% of the natural gas it consumes. Moreover, the demand for natural gas in the country is steadily on the rise. The Indian government is planning to increase the share of this clean burning fuel to 15% in the country's energy mix by 2030 from the current level of 6.5%.
This will definitely result in increasing LNG imports from India, and create more opportunities for global oil and gas operators like TOTAL to expand operation in the country.
In March 2018, Cheniere Energy, Inc. (LNG - Free Report) and GAIL (India) Limited started their 20-year Sale and Purchase Agreement to deliver liquefied natural gas sourced from the United States to India. (Read more: Cheniere Energy Begins Long-Term Agreement With GAIL)
Zacks Rank & A Key Pick
TOTAL currently has a Zacks Rank #3 (Hold). A better-ranked stock in the same industry is Premier Oil PLC (PMOIY - Free Report) , having a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings estimates for the company have moved up 47.6% to 31 cents in the past 30 days.
Shares of both Premier Oil and TOTAL have outperformed the broader industry’s growth in a year’s time.
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