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Total shores up LNG market share with Engie asset grab

The French supermajor's acquisition gives it access to 10% of the global LNG market, second only to Shell

Total's acquisition of Engie's liquefied natural gas assets significantly strengthens the French supermajor's gas portfolio. For French utility company Engie, it offers an exit route from its upstream operations and reduces its exposure to energy-price volatility.

Total has agreed to acquire all of Engie's upstream LNG assets, for around $1.49bn-$2bn.The final amount will depend on future oil price movements. These include its stakes in the Cameron LNG plant on the Louisiana coast and other liquefaction plants, as well as long-term LNG sales and purchase agreements, an LNG tanker fleet and access to regasification capacities in Europe. The deal, which requires regulatory approval, is expected to close by mid-2018.

The acquisition will bring the volume of LNG under Total's control globally to almost 40m tonnes a year, giving it access to around 10% of the global market-placing it second only to Shell.

Playing catch-up

Total has been playing catch-up with Shell in the gas sector, since the Anglo-Dutch firm acquired BG Group for around $50bn in a deal completed in February 2016. The Engie acquisition helps Total to become a more integrated LNG player, and potentially a more competitive one.

With the acquisition of Engie's 16.6% stake in the three-train Cameron LNG, the acquisition provides a US midstream asset to complement its US gas production assets, both in the Gulf of Mexico and North American shale. Cameron could be expanded by another two trains later. Total also gets Engie's 5% stake in the first train of Egypt's Idku LNG project. These acquisitions will bring Total's portfolio of liquefaction capacity to 23m t/y by 2020. Meanwhile, the acquisition of Engie's 10 LNG tankers will bring Total's fleet up to 13 vessels.

For Engie, the disposal enables the company to focus on its downstream gas business, including regasification and gas supply, as well as its increasingly important renewables and low carbon activities.

Under Isabelle Kocher, who took over as chief executive in May 2016, Engie has been restructuring its activities. That has involved selling off coal and nuclear power assets, while expanding in the renewables sector.

"The intended transaction is in line with Engie's strategy to reduce its exposure to commodity prices," Engie said in a statement. "It also completes the group's action plan to move away from upstream oil and gas activities following the announcement of the sale of Engie Exploration & Production International in May of this year."

Under the agreement Total and Engie will forge a 10-year partnership under which Engie will become Total's preferred supplier for all new projects of renewable hydrogen and biogas supply. Engie also said it would create a new operation responsible for the development of renewable hydrogen and that it would now accelerate its downstream activities.

The French government sold off a 4.1% stake in Engie for €1.53 ($1.8bn) in September, as part of a €10bn programme to raise finance from state assets. The government still holds a stake of around 25.5% in Engie.

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