Mozambique Gas Summit: Country on path to become major LNG supplier

The Mozambican government has declared that the agreements and contracts signed so far for the eventual sale of liquefied natural gas (LNG) produced in the Rovuma Basin, in the far north of the country, show that Mozambique is on its way to becoming one of the world’s major suppliers of LNG.

Speaking in Maputo on Thursday, at the opening of the fifth edition of the Mozambique Gas Summit, the Deputy Minister of Mineral Resources and Energy, Augusto Fernando, stressed the approval in February of the development plan for the onshore LNG project of the US company Anadarko Petroleum and its partners in the consortium that will run Rovuma Basin Area One.

The Area One consortium will pump gas from the offshore fields to two LNG plants (known as “trains”) in the Afungi Peninsula, in Palma district. When the two plants come on stream, they will produce 12.88 million tonnes of LNG a year. Fernando thought this was a turning point in placing Mozambique on the world map of LNG supplies.

“We aren’t just talking about aspirations”, he said. “We are making stable and tangible progress so that we become a new supplier of Liquefied Natural Gas”.

The government and Anadarko consider the LNG trains planned for the Afungi Peninsula as an opportunity o respond to the growing world demand for a sustainable, reliable and cleaner source of energy.

Anadarko is the operator of Area One, with a shareholding of 26.5 per cent. Its partners in the consortium are the Japanese company Mitsui (20 per cent), PTT of Thailand (8.5 per cent), three Indian companies, ONGC Videsh (16 per cent), Bharat Petroleum (ten per cent) and Oil India (four per cent), and Mozambique’s own National Hydrocarbon Company, ENH (15 per cent). The reserves so far discovered in Area One amount to about 75 trillion cubic feet of recoverable natural gas.

So far the consortium has signed a series of binding contracts for sale of the LNG (including with Electricite de France and Tohuku Electric of Japan), as well as several non-binding agreements. Anadarko believed these will make it possible for all members of the consortium to take the Final Investment Decision in the first half of 2019.

Anadarko Vice President and Mozambique country manager, Steve Wilson, told the summit that advances have been made in building the access road to Afungi, and the landing strip, and expanding the workers’ camp, by almost tripling the number of beds available, from 400 to 1,150.

“The road is progressing well, and is almost 60 per cent complete. It will be finished in March next year”, said Wilson. The expansion of the camp is also going well, and work has begun on the landing strip. It will be completed in two phases – in November next year, and in March 2020”.

Anadarko estimates total investment in the project at 23 billion US dollars. 2.5 billion dollars will be spent on buying goods and services from Mozambican companies, while there will be 5,000 jobs for Mozambicans in the construction phase, and 1,500 when the LNG trains are operating.

Wilson described the project as “a game changer”, which would have “an enormous positive impact on the country, and improve the prospects for Mozambicans now and for future generations”.

One problem is that ENH needs to raise the money to finance its share in the Rovuma Basin projects. The amount that ENH must borrow is around two billion US dollars.

Last month the Minister of Economy and Finance, Adriano Maleiane, said the government wants to issue a sovereign guarantee for this two billion dollar loan, and has put it into the draft state budget for 2019, which will be debated in the Mozambican parliament, the Assembly of the Republic, in December.

With a government guarantee, ENH will be able to go the international capital markets to seek the loan. Maleiane said that the banks who will finance the construction of the Rovuma Basin LNG facilities will need guarantees from all the shareholders “so that during the implementation phase there will be no problems”.

Speaking to reporters at the Gas Summit, the ENH Chairperson, Omar Mitha, said “it’s all been taken care of”. He did not regard the government guarantee as adding to Mozambique’s foreign debt, and regarded it as extremely unlikely that it would ever be used.

The guarantee was only necessary because, in the current phase, when almost nothing has been built, the LNG project has no assets that banks would accept as collateral. Once the LNG train have been built, however, there would be no further requirement for a government guarantee.

Mitha did not say who would lend ENH two billion dollars. Source: AIM