Mozambique Oil & Gas: Anadarko FID only in mid-2019 – report

Eager for foreign exchange inflows to finance the increasing deficit of the current account Mozambique will continue to wait for the  Final Investment Decision (DFI) of the Mozambique LNG project led by Anadarko Area 1 of the Rovuma Basin, in the province of Cabo Delgado, at least until mid-2019, according the latest report from the International Monetary Fund, @Verdade writes.

Furthermore the IMF warns that illegal debts of Proindicus, EMATUM and MAM are conditioning investments that ENH need to make at the  Area 1 Offshore Consortium.

Despite recent developments in our country, including the adoption last month of the Development Plan and the beginning of the resettlement of Afungi communities, as well as the progress in hiring buyers for LNG to be produced, Anadarko FID as well as of its partners in the consortium Offshore Area 1, which has been delayed since 2015 should not happen during the year and the most recent IMF analysis projects that longed decision to “mid 2019” which aggravates the macroeconomic projections.

“In the medium term, a major delay in the implementation of Anadarko LNG project is the main risk,” concluded the team of staff of the International Monetary Fund (IMF), which was in Mozambique in early December performing the annual assessment of the health of our economy parents.

Anadarko source contacted by @Verdade neither confirmed nor denied the forecast, and reiterated that the Final Investment Decision will only happen when the purchase contracts are completed and sale and sufficient financing arrangements for the Area 1 project.

“The Area 1 Offshore consortium, led by Anadarko, continues to make significant progress in the advancement of Mozambique LNG project towards the final investment decision. We agreed with the main commercial terms, including volume and 5.1 MTPA price of distribution, which is more than half of our target of 8.5 MTPA. This includes a Purchase and Sale Agreement with EDF announced last month. It also includes an Agreement of Purchase and Sale with PTT of Thailand that is currently being submitted for approval by the Thai Government and a Framework Agreement with Tohoku Electric Power Company Company of Japan, Inc, among others. Additionally, we are in advanced talks with several buyers to achieve our goal for FID, ” the source explained to @Verdade.

illegal debts condition ENH investment in the Area 1 Consortium

However the annual IMF’s staff report warns of another risk associated with this project which is crucial to make Mozambique a world leader in LNG production.

“(…) In view of the current funding prospects, there are also substantial risks to be mitigated in relation to external financing plans that the authorities need to hire as concessional credit related to its investment in the Development Plan”, it can be read in the report that the @Verdade had access.

Decoding the report, the IMF is warning that for the FID of 25 billion US dollars to happen the National Hydrocarbons Company, which represents the interests of Mozambique in the project area 1,  must invest about 2.2 billion US dollars corresponding to their share of 15 percent in the consortium.

ENH is one of the partners of the Area 1 Consortium  led by Anadarko with a share of 26.5 percent, the Japanese Mitsui (20 percent), Indian ONGC (16 percent), the Indian Barhat Petro Resources (10 percent), the Thai PTT Exploration & Production (8.5 percent) and also Indian Oil India (4 percent).

Since the end of the research phase of the US oil investments have plummeted and for 2018 are expected to enter in Mozambique only 150 million US dollars.

Now due to unconstitutional debts and illegal sovereign guarantees of Proindicus state, EMATUM and MAM, the credibility of our country in the markets is extremely stained and few banks will want to return to lend money to Mozambique or will only do so when the issues surrounding these loans have been resolved according to the IMF recommendations .

In fact precisely because of the illegal debts the Mozambican state failed to secure the financing of 700 million US dollars ENH needed to carry on their participation to 10 percent in another consortium that is building a floating plant for LNG in area 4, also in the province of Cabo Delgado.

The solution, revealed to @Verdade the chairman of the board of directors of the National Oil Company of Mozambique, Omar Mitha, was to borrow money from the consortium partners, ENI, CNPC, the Kogas and Galp in terms that are not publicly known  as since 2015 the state hydrocarbons company does not publish its  Annual Reports.

Asked in June 2017 by @Verdade how ENH would return the loan to its partners in Area 4 Mitha said that “we will return because the project will make money, will sell the gas, will pay the costs, senior banks and left a portion for dividends and a share of the dividends will be delivered to those who financed us. “

Paradoxically, the Frelimo government that hired illegal debts is aiming to propose to its creditors  that debt payment  will be made through revenues from LNG that will be produced in the Rovuma Basin. source: @Verdade