Mozambique Oil & Gas: Natural gas extraction likely to begin in 2021

The beginning of the extraction of natural gas in the Area 1 block, northern Mozambique, where Indian companies have a combined stake of 30 percent, should only begin in 2021, which is later than initially planned, according to Indian newspaper the Economic Times.

The newspaper quoted a sector source as saying that the fall in prices of both oil and natural gas has led companies to postpone investment decisions “as customers are not queuing up to buy the product.”

“It’s the classic chicken and egg situation where you can’t sign supply agreements because the final investment decision has not been made because you don’t know exactly who will buy the gas,” the source said.

This problem is due to the massive drop in liquid gas prices over the past two years, following an oversupply that left both sellers and buyers feeling insecure about signing long-term contracts.

The newspaper also reported Mozambique is not a unique case and there are several other projects faced with the same uncertainties, although in this case the Area 1 block operator, Anadarko Petroleum of the United States has already signed some gas supply contracts.

The final investment decision is expected to be made this year, according to the source, and production may begin in 2021, three years later than was announced by Indian group Oil and Natural Gas Corporation (ONGC) when it acquired a stake in the project in 2013.

ONGC and Oil India together purchased a 10 percent stake in the block from Videocon Mauritius Energy Ltd for the sum of US$2.475 billion and two months later ONGC acquired an additional 10 percent from Anadarko Petroleum and paid US$2.64 billion.

The Indian group Bharat Petroleum Corporation took a 10 percent stake in the project in 2008. Anadarko Petroleum, with 26.5 percent, is the block’s operator. (macauhub/MZ)