Rovuma exports inch closer
Eni's project in Mozambique should soon get the official go-ahead. Tanzania's progress is much slower
Once upon a time, the development of gas resources in the Rovuma basin was seen as a race between Mozambique and Tanzania. Today, Mozambique has all but sealed the win with a floating liquefied natural gas project almost ready to get a final investment decision. Beyond that, there is little certainty on the projects either side of the maritime border.
The Eni-operated Coral South Floating LNG project benefits from being almost entirely offshore, including having won an exemption from needing to supply any gas to Mozambique. Instead, its entire 3.4m tonnes a year of output has been bought by BP over a 20-year period. First gas is targeted for 2023.
A consortium of Technip, JGC, and Samsung Heavy Industries has won the contract to build the FLNG facility, and financing commitments have been received from banks who will lend under cover of Chinese, South Korean, French and Italian export-credit agencies. Nevertheless, FID is still delayed, despite confident talk from Eni last autumn that it would come before the end of 2016.
There are still a number of moving parts for the project, not least the entry of ExxonMobil into the consortium. Eni is planning to sell half of its 50% stake in the Area 4 to the US supermajor, making those two joint operators ahead of smaller shareholders CNPC with 20%, and Galp, Kogas, and Mozambican national oil company ENH with 10% each.
Eni is understood to want to announce the Exxon farm-in and FID on Coral South at the same time, meaning that any delays to one part will delay the other. One factor delaying the farm-in is that Mozambique's cash-strapped government is haggling over the amount of capital gains tax to be paid on the deal.
Things are also complicated by the presence in the consortium of China's CNPC. Its unwillingness to let Exxon buy a 25% operator stake for less than CNPC paid for 20% has been compounded by a worsening of political relations between China and the US since Donald Trump's election to the Presidency (and his nomination of ex-Exxon chief Rex Tillerson as Secretary of State). China and the US—specifically, Exxon—have ongoing disputes in the South China Sea, and Mozambique's Area 4 could be a valuable pawn in that game.
Area 4 includes the Coral field, the southern half of which will supply the FLNG project, but also a huge, prolific field which crosses the border into Area 1, operated by Anadarko. Called Mamba in Area 4 and Prosperidade in Area 1, the straddling resource is understood to be Exxon's real target in Mozambique—to the extent that the Texans have agreed to leave the Coral field to be operated by Eni. Ultimately, Exxon is thought to want to gain operatorship of the entire straddling resource, by buying into Anadarko's Area 1 as well.
Anadarko is taking the lead on negotiations with the government for the onshore LNG park, which will be shared by both Areas 1 and 4. But progress there is slower. Resettling the local community is one aspect, but another is how rights and responsibilities—both onshore and offshore—are divvied up between Anadarko and Eni, whose relationship has never been easy.
Anadarko has 26.5% in Area 1, followed by Mitsui with 20%. Three Indian companies own 30% between them—ONGC has 16%, Bharat PetroResources has 10%, and Indian Oil Company, 4%. Mozambique's ENH has a 15% stake in the project, and the final 8.5% is owned by Thailand's PTTEP.
Even this early in 2017, the stakeholders have stopped saying FID will happen this year. Rather, they are targeting 2018 for a decision and first gas in 2023. In the first phase, Anadarko plans to build two trains to produce 6m t/y of LNG each.
Slower in Tanzania
Despite Mozambique's delays, it has now almost certainly won the LNG race with Tanzania. Statoil, the operator of Block 2, said last year that FID was five years away—despite President John Magufuli urging his government to get things moving.
Statoil will develop the onshore LNG project in partnership with BG, now owned by Shell, which has the neighbouring blocks. The total resource is now estimated to be 57 trillion cubic feet—far smaller than the estimated 180 trillion cf in Mozambique's Rovuma Basin blocks, but significant nonetheless (and more than enough to justify an LNG plant). The plan is for a $30bn, 10m-t/y onshore LNG facility that could be operational by 2028. Other shareholders include Ophir Energy, and Exxon—which is causing some disquiet both in Mozambique and Tanzania over concerns that the US company may accelerate development in one country rather than the other.
Magufuli's eagerness to get the LNG project moving will come as a relief to stakeholders who have been watching nervously as the government cracks down on foreign investors in other sectors. Magufuli's popularity is based on an anti-corruption drive but also being seen to be protecting Tanzania from the clutches of rapacious foreign capitalists.
Last year, however, the government and the investors began negotiations on the Host Government Agreement (HGA) for the project, which the government expects to take a year and a half. According to Ahmed Salim of Teneo Intelligence, a consultancy, "the HGA has been pushed back so many times, so at least the fact that it's being dealt with now is a positive development."
Another Magufuli move was to accelerate the land purchase for the LNG plant, another "positive development that has helped ease some of the frustration of the investor community," Salim says, adding: "The government seems to be quite aggressive towards the mining and telecoms industries, but it does seem that the energy sector has got a bit of a pass. Although things are slow, they're at least moving steadily."
Slow progress: Tanzania's LNG plans are not speeding ahead