Mozambique Oil & Gas: Standard Bank/ICBC finance benchmark FLNG project

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Image courtesy of Eni

A new $8bn investment in Mozambique’s Coral Floating Liquefied Natural Gas (FLNG) development marks Mozambique’s first step as a regional and global offshore natural gas producer and supplier. The landmark energy deal is the first of its kind in the country and could transform Mozambique’s growth prospects.

Coral South FLNG is the first project sanctioned by the Area 4 partners for the development of the considerable gas resources discovered by Eni and its partners in the Rovuma Basin offshore Mozambique. It targets the production and monetization of the gas contained in the southern part of the Coral gas reservoir, by means of a floating LNG (FLNG) plant with a capacity of 3.4m tons per year (MTPA).

A sale and purchase agreement was signed back in 2016 for the sale of 100% of the LNG production to BP.

“This game-changing transaction initiates a cycle of energy investment set to return Mozambique to growth while heralding the country’s arrival as a key global liquefied natural gas supplier,” says Paul Eardley-Taylor, head, oil and gas, Southern Africa, Standard Bank. “Our support of the funding of the Coral FLNG project grew out of our long-term commitment to Mozambique, consistently supporting the country’s potential as a future offshore natural gas production and export giant.”.

The investment also gives momentum to resource development in Mozambique, one of the poorest countries in the world, that’s also been struggling with a debt crisis. At the start of last year, it failed to make an interest payment on a eurobond, becoming the first African nation to default in six years.

Italian oil company Eni closed $4.7bn in project financing for its own and subcontracted work in the project in mid-December. In March last year, Eni and ExxonMobil signed a sale and purchase agreement to enable ExxonMobil to acquire a 25% interest in Area 4 offshore Mozambique where Eni is the operator, through EEA. The remaining interests in Area 4 are held by CNODC (20%), Empresa Nacional de Hidrocarbonetos E.P. (ENH, 10%), Kogas (10%) and Galp Energia (10%).

Eni’s portion of the overall financing was split between a BPI Export Credit Agency Covered Loan; KEXIM Export Credit Agency Covered Loan; Ksure Export Credit Agency Covered Loan; Sace Export Credit Agency Covered Loan; Sinosure Export Credit Agency Covered Loan; Commercial Bank Direct Loan; and KEXIM direct loan.

Standard Bank and its 20% shareholder, the Industrial and Commercial Bank of China (ICBC) are collectively the largest lenders to the over project, which also involves global energy giants Petrochina, GALP, ENH and Kogas as investors (with their own project tranches) as well as Eni.  ICBC took on multiple roles in the overall financing: Pathfinder Bank; K Sure agent; Chinese tranche agent and one of the facility account banks. Standard Bank meanwhile is commercial facility agent; onshore account bank and security trustee in respect of the project.

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