Maputo's new partner
An American oil giant will take the lead in the Rovuma
It seems Mozambique's offshore gas business will get a new master in 2018: ExxonMobil. The US supermajor has already agreed terms—both with the vendor, Eni, and the Mozambican authorities—to take a joint operator stake in Area 4 of the Rovuma Basin, and the deal should close before the end of 2017. It's likely, too, that Exxon will live up to the rumours and take the operator stake in Anadarko's adjacent Area 1.
Eni reached a final investment decision (FID) on a floating liquefied natural gas plant for Area 4's Coral South field last June, just after announcing Exxon's involvement. The terms of the deal leave Eni as upstream operator for the whole area, and in charge of Coral South FLNG, while Exxon will lead the construction and operation of onshore liquefaction facilities.
Exxon will share the onshore LNG facilities with Anadarko. The two consortia also share the Prosperidade field, the largest one found in the Rovuma. So far, Anadarko hasn't said it wants to sell Area 1, but the speculation hasn't gone away. In October, Mitch Ingram, Anadarko's big-money signing from BG to head up the Mozambican LNG development, was given a number of other projects in the firm to run too—a hint of the change to come.
Mozambique's government knows that simplicity and economies of scale would be outcomes if a single owner and operator could amalgamate the two areas. Like Mayfair and Park Lane on the Monopoly board (or Boardwalk and Park Place for American readers), Areas 1 and 4 are valuable properties on their own—but as a set are worth more than the sum of their parts. And the government likes Exxon's technical track record and its financial muscle. Luring in the world's oil firm would be an ego-boost too.
Where Exxon goes Qatar Petroleum (QP) may follow. The emirate, already the world's largest producer of LNG, is seen by some in Mozambique as a gateway to global LNG markets—and it's the lack of binding sale-and-purchase agreements that's holding up FID for the onshore LNG plans. If Mozambique can inveigle its LNG projects into Qatar's portfolio, so the thinking goes, it will be able more easily to sign crucial sales deals with QP's clients in Asia.
Further down the coast, seismic surveys are getting underway for the blocks awarded in the fifth and latest licensing round. Although negotiations over contracts are dragging on, exploration will almost certainly start in 2018. Exxon will be the dominant player here too.
In partnership with Russia's Rosneft, the Texan company holds both offshore blocks in the Zambezi Delta and one of two in Angoche (thought by those in the know to be Mozambique's best oil prospect). Eni, in partnership with Sasol and Statoil, won the other area.
Mozambique is still dreaming of a gas pipeline running from the Rovuma Basin, in the far north of the country, all the way into South Africa. South Africa's enthusiasm has also grown. Its new energy minister stated her country's preference to import Mozambican gas in her first speech to parliament, and has since reiterated that stance at industry conferences.
The project has plenty of naysayers, who point out that it would struggle to compete with LNG shipped in to Richard's Bay from the Rovuma or anywhere else in the world. But Mozambique has a strong incentive to support the pipeline: it would bring industry, and jobs, to central parts of the country that feel excluded from economic development and have begun turning against the ruling Frelimo party.
South Africa's zeal is slightly harder to fathom, but the ANC government insists the infrastructure would be in line with its neighbourhood policy. The pipeline could potentially supply gas to Zimbabwe and Zambia too.
But competing proposals might get in the way. One is called GasNoSu, run by South African company Gigajoule, which already helps sell Sasol's Mozambican gas within Mozambique; the other is the African Renaissance Pipeline (ARP), which benefits from Chinese patronage as well as deep connections in Mozambique's political elite, and in South Africa. A decision might not be reached in 2018—either way, expect ARP to come out on top.
Tom Bowker is Petroleum Economist's Correspondent in Maputo and Editor at Zitamar News
This article is part of Outlook 2018, our annual book looking at energy market trends for the year ahead. To purchase a copy, click here