E ENI Spa

By Eric Sylvers 

Milan-- Eni SpA said Sunday it made a massive natural-gas discovery off the coast of Egypt in what the Italian oil-and-gas company is calling the largest-ever find in the Mediterranean Sea.

The gas, estimated at about 30 trillion cubic feet or 5.5 billion barrels of oil equivalent, is in a field about 80 miles off the Egyptian coast and is enough to supply the North African country for decades. Most of the gas will be used by Egypt, with any excess exported, perhaps using a liquefied natural gas plant that Eni has not far from the field.

If the discovery proves to be as big as thought, it will likely lead to Eni boosting its production targets for the coming years. The company had been forecasting that it would find 2 billion barrels of oil equivalent over the next four years and in the seven years to 2014 had found 10 billion barrels, less than double the Egyptian find.

Eni has been prospecting for oil and gas in Egypt for more than 60 years and is the biggest Western producer in both the country and all of Africa. The company will use existing facilities, including offshore platforms, near the new find to keep the development costs relatively low, Eni Chief Executive Claudio Descalzi said in an interview. A subsea well also will be used to limit costs.

"This is a confirmation of our strategy of developing conventional assets in mature areas where we have strong geological knowledge and where we have synergies," said Mr. Descalzi. "We have done that very successfully in the past 3-4 years."

It will take several months to sort out the development and production leases, and drilling is expected to begin early next year, said Mr. Descalzi, who wouldn't say when production might begin. If drilling starts in early 2016, production would likely kick off about a year later based on similar projects.

"We will fast track this project and production will begin as soon as possible," Mr. Descalzi said. "This discovery is transformational for Eni and especially for Egypt."

The Leviathan natural gas field off the coast of Israel was the largest find in the Mediterranean before the just-announced Egyptian field.

While Eni in recent years has generally sold stakes in its big finds to share the development costs, that is unlikely to happen with the just-announced Egyptian field due to the relatively low development costs, said Mr. Descalzi.

Though natural gas is trading near a 2 1/2 year low, Mr. Descalzi said that would have no effect on the decision on when to start pumping the gas from the Egyptian field.

Eni, through an Egyptian subsidiary, has complete control of the exploration and will have a 50% stake in the production with the rest held by the Egyptian state oil and gas company.

The Egyptian find is one of Eni's largest ever though it is smaller than a natural gas field being developed off the coast of Mozambique.

Write to Eric Sylvers at eric.sylvers@wsj.com

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(END) Dow Jones Newswires

August 30, 2015 12:28 ET (16:28 GMT)

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