East Africa LNG creeping along
Mozambique is still leading the race for East Africa’s first LNG project. But there, as in Tanzania, it’s more a marathon than a sprint
ANOTHER year, another deadline for Anadarko’s and Eni’s offshore gas production and liquefaction projects. State oil and gas company ENH told a conference in Maputo in January that final investment decisions (FIDs) would definitely happen in 2016. But treat that with some scepticism.
Eni’s floating liquefaction project for the Coral field has the best chance of meeting the deadline. In February, the Italian firm won government approval for the development plan. Eni says the plant will be more than a third larger than the 2.5m tonnes a year it had originally discussed. The company benefits from having already signed an offtake agreement with BP for all the liquefied natural gas.
Eni also reached a unitisation agreement with Anadarko, the operator of neighbouring Offshore Area 1, late last year. The deal was announced by Anadarko at the same time as it said it had reached a deal with the government to supply the domestic market with around 100m cubic feet a day.
Eni seems to have ducked any domestic gas obligation for its floating LNG project, but will presumably make up the difference once it starts developing reserves that straddle those being developed by Anadarko.
A big question mark remains over what Mozambique will do with the 25% that it wants from all new gas projects – but one possible answer was revealed in March. SacOil, a South African firm, signed a joint-development agreement with CPP, the pipeline-building subsidiary of China’s CNPC, to build a 2,600 km gas pipeline from the Rovuma to South Africa’s Gauteng province. CNPC also has 20% of the Eni-led Area 4 consortium.
Corporate consolidation in the Rovuma basin could also affect the developments. Eni has made no secret that it sees its 50% stake in Area 4 as too big. Shell could come in once it’s digested BG. ExxonMobil has also been into Eni’s data room, Petroleum Economist understands.
ExxonMobil’s name is more usually associated with a possible takeover of Anadarko – which looks vulnerable during the oil-price slump. The government would welcome any merger or acquisition: the capital gains tax would be as water to a dying man.
The Rovuma basin projects are not quite the only game in town. Exxon won big, in partnership with Rosneft, in the fifth exploration-block auction in October 2015. Eni won one block, in partnership with Sasol and Statoil, and Sasol won another on its own, next door to its existing onshore projects in southern Mozambique. Another block went to Delonex.
Plenty of supporters
In Tanzania, Mozambique’s experience has taught the companies and authorities well: they are holding off promises of FID on the Ruvuma basin LNG project until at least 2018. By the time the project comes on line, in the 2020s, they hope, Asian demand will have recovered along with prices.
The players are Shell, along with Statoil, ExxonMobil and Ophir Energy as well as state-run Tanzania Petroleum Development Corporation (TPDC). The risk they face, however, is that Mozambique’s projects run smoothly and to plan, sating global demand for East African LNG. Shell’s takeover of BG has also inevitably caused some delays.
The risk Tanzania faces, however, is that Mozambique’s projects run smoothly and to plan, sating global demand for East African LNG
To speed things up, the energy minister has formed a cross-governmental task force drawn from the Ministry of Land and Human Settlements, the Ministry of Finance and Planning, his own ministry, TPDC, and the companies involved in the LNG project. He wants the committee to “complete all preparations” for the project by the end of November – though he did not specify exactly what that means.
Unlike in Mozambique, where the Rovuma basin projects are remote, in Tanzania a gas pipeline already runs from close to where the LNG project will be built to the commercial capital of Dar es Salaam.
It was built to take gas from Maurel et Prom and Wentworth Resources’ Mnazi Bay concession, which sold its first gas into the pipeline in 2015; and joins into the pre-existing pipeline which takes gas from the offshore Songo Songo field, which has been supplying gas to power stations outside Dar Es Salaam since 2004. Meanwhile, in February 2016, Wentworth announced the Mnazi Bay concession contains 20% more gas than was previously thought to be the case.
This article is part of an in-depth series on offshore production. Next article: Qatari flexy time.