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HUBCO to Buy Eni’s upstream operations

KARACHI: Eni, the Italian oil and gas exploration firm, has finally ended its 20-year of journey in Pakistan, as it agreed on a price to sell its local businesses to a joint venture of diversifying Hub Power Company (Hubco) and Eni employees, according to a bourse filing on Monday.

“The Hub Power Company together with Eni’s local employees (in 50:50 joint venture) has executed definitive agreements to acquire all the upstream operations in Pakistan of Eni and renewable energy assets owned by Eni in Pakistan,” Hubco Company Secretary Sohail Kassamali said in a notification to Pakistan Stock Exchange (PSX).

“The acquisition is part of our diversification strategy,” Hubco Chief Executive Officer Khalid Mansoor told media.

“Yes, we (Hubco and Eni) have agreed upon price of the transaction,” he said.

He, however, kept the price a secret, adding that contractual obligations do not allow him to disclose the acquisition price at this point of time.

Earlier, Hubco had already done due diligence, signed the sale purchase agreement (SPA) and shareholders’ agreement (SHA) with Eni. The acquisition is now subject to regulatory approvals from the institutions including Securities and Exchange Commission of Pakistan (SECP) and Competition Commission of Pakistan.

Eni formally put its local operations on sale in June 2020 after it, along with other players in the oil and gas exploration sector, failed to convince the government to revise up their profit margins and the incumbent and the previous government in the centre prolonged delay in auction of new oil and gas exploration blocks in the country, sources told in June 2020.

In January 2021, the government finally auctioned 15 new blocks nationwide following improvement in the law and order situation in the country which was an impediment earlier.

The Eni, in partnership with the US-firm ExxonMobil and two local partners; Oil and Gas Development Company (OGDC) and Pakistan Petroleum Limited (PPL), conducted offshore drilling at Kekra-1 well in Karachi waters at the cost of around $100 million sometime in April 2019, but the well did not produce hydrocarbons.

“We believe there is a lot of potential in the development of the indigenous oil and gas exploration industry,” Mansoor said.

The country is has a dire need to develop indigenous oil and gas exploration sector to reduce its reliance on imported fuels. “We felt this was our national responsibility and duty as well that we should use companies’ financial strength and professional and technological expertise to grow in this area,” he said.

Besides, the deal consists of acquisition of 10 megawatt (MW) photovoltaic plant. “We are already working on solar power projects,” he said.

At present, Hubco operates oil and coal-fired power plants and is an equity holder with Engro and the government of Sindh’s coal mining operations in Tharparkar.

Eni’s gas production has depleted to 19,000boepd (barrels of oil equivalent per day) in 2019 compared to over 22,000boepd in 2017, according to a June 2020 document containing information related to the Eni assets in Pakistan.

However, the document further suggested there is room for increase in production as it maintained “solid track record of sustainable production at low operating cost.”

Eni assets in Pakistan

Eni’s current production is focused around three operated and six non-operated producing assets.

“Producing assets are the operated Bhit, Badhra and Kadanwari assets and the associated processing facilities, and the non-operated Zamzama, Sawan, Latif, Miano, Tajjaland Mitha assets,” the document said.

“Assets have high quality partners such as Ocean Pakistan (formerly BHP), UEG (formerly OMV), OGDCL, KUFPEC and PPL.”

New energy business comprises a 10MW photovoltaic plant developed near the Bhit gas field, which provides power to the upstream operations and contributes towards Eni Pakistan’s ESG agenda.

Eni’s business in Pakistan is organised under three legal entities; Eni Pakistan Limited, Eni AEP Limited and Eni Pakistan M Limited SARL, and its new energy business which is organised under Eni New Energy Pakistan (Pvt) Ltd.

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