By Agnieszka Flak and Karolin Schaps
MILAN/LONDON (Reuters) - BP (L:BP) has agreed to buy 10 percent of Eni's (MI:ENI) Shorouk concession offshore Egypt, which includes the giant Zohr gas field, for $375 million, joining other oil majors in increasing bets on the growing gas market.
The deal gives Eni much-needed cash as part of its 5 billion euro divestment plan to continue investing and paying dividends despite weak oil prices.
The companies also agreed BP could purchase another 5 percent of the field before the end of next year, when the Zohr field is slated to start production, under the same terms and that BP would reimburse Eni around $150 million in past expenditure.
Zohr, discovered by Eni last year, has an estimated 850 billion cubic metres of gas in place. It will help plug Egypt's acute energy shortage and save the country billions of dollars in hard currency that would otherwise be spent on imports.
Once an energy exporter, Egypt has turned into a net importer because of declining oil and gas output and increasing consumption. It is trying to encourage quicker development of recent discoveries to fill its energy gap as soon as possible.
A run of big gas finds off the Egyptian coast have made the country a top destination for energy investment even as firms seek to save cash to handle low oil prices better.
The deal deepens BP and Eni's partnership in Egypt, where they announced a significant gas discovery in the East Nile Delta in June.
A stake in Zohr, one of the biggest ever gas discoveries, will raise BP's exposure to the gas market, just months after rival Shell (LON:RDSa) became one of the world's biggest gas traders by acquiring BG Group.
BP has earmarked Egypt as one of its key growth markets. It wants to double production there in the coming four years and sell into the growing domestic market.
Eni, whose subsidiary IEOC owns 100 percent of the Shorouk concession, is also in the process of selling stakes in its Area 4 field in Mozambique to Exxon Mobil (NYSE:XOM).