Anadarko has taken some $4 billion in costs out of its Mozambique liquefied natural gas project in the last two years, a top executive told the World Gas Conference.
The company aims to lock in the advantage of today’s low point in the cost cycle as well as creating a “significant opportunity” for local content as it looks to a final investment decision in the first half of 2019.
Anadarko executive vice president for deep-water and international, Mitch Ingram, did not release a full capital spending figure for the project, but did note the cost differential between 2016 and 2018 over both the onshore and offshore segments as the hydrocarbons sector overall has worked to rein in major project costs amid broader commodity price volatility.
“We feel that through hard work in the last two years with our teams and our contractors we’ve managed to optimise the development, and we have (generated) $4 billion in savings,” Ingram told conference delegates.
“This really led to the low cost we’re forecasting for our onshore development, where we expect it will be less than $600 per tonne.” The company has spent the first half of 2018 focused on building the credibility of the project with the government, setting market terms, drilling down on cost certainty and preparing the site, including a resettlement programme.
At present the company is working on contract pricing and finalising sales and purchase agreements.
The company counts 6.7 million tonnes per annum of announced deals, and said it has key terms agreed to for a targeted volume of 8.5 million tpa or greater from “world class buyers with captive demand”. Anadarko is also now “actively” ramping up financing activities on the project with export credit agencies and commercial banks, among the last steps needed before a final investment decision, Ingram said.
Ingram also expressed optimism regarding the environment for sanctioning such projects.
“We’re beginning to see that the sweet spot is coming where LNG projects are able to be committed to over the next year or so,” he said. “Mozambique LNG is very well placed to deliver LNG for decades going forward.”
Anadarko earlier in the year secured approval from the Mozambican government for its field development plan for the Golfinho-Atum fields in Area 1 which will feed gas to the LNG complex at Palma in Cabo Delgado province.
It will initially consist of two trains with nameplate capacity of 12.88 million tpa of LNG. It will also supply 100 million cubic feet per day of natural gas into the domestic market.
The project may also pave the way for possible future expansion of up to 50 million tpa from Area 1. Gas from the Prosperidade discovery, which extends into adjacent Eni-operated Area 4 where it is called Mamba, would contribute to these supplies.
A consortium of CB&I (which recently merged with McDermott), Chiyoda and Saipem has been selected to construct the project’s two 6.44 million tpa liquefaction trains.
Anadarko’s push to development, however, has not been without obstacles.
One panel moderator asked about the long-term stability of the host government’s policy on LNG, suggesting that resource nationalism could be a “temptation” for the authorities in Maputo. “We’ve spent a lot of time over the last two years working very closely with all levels of the government to ensure we do have enough of that legal framework in place, to ensure that the commitments we make are sustainable and long-term and secure going forward,” Ingram said.
“We’re very comfortable that the government at all levels are very focused at making sure the project and the energy sector is fully supported,” he pointed out.
Also, the project has recently been faced with unrest in the vicinity of Palma due to the activities of an Islamic militant group.