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President Felipe Nyusi met Anadarko head Al Walker to discuss the FID
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Mozambique nears FID under insurgency cloud

A decision is rapidly approaching for the first of the long-awaited Rovuma Basin LNG projects

Mozambique will finally hear a Final Investment Decision (FID) on 18 June for the first of the long-awaited Rovuma Basin LNG projects

US independent Anadarko, which is now set to be bought by its peer Occidental—which will, in turn, immediately offload its African assets including Mozambique LNG to Total—has reached this stage against considerable odds.

It was consistently written off by industry observers as too small to make a success of the Mozambique LNG project. It weathered the oil price crash of 2015, and Mozambique's sovereign debt scandal, which broke in 2016 and is still ongoing—but has put together the sales agreements and financing commitments to be able to take a decision.

If the banks are willing to back the project with Anadarko in the lead, they will be even happier with Total as operator. Questions remain, however, over how Mozambique's national oil company, ENH, will finance its part of the project. It wants to borrow internationally, to play with the big boys, rather than be carried by them; but is hampered by Mozambique's continued default on its international commercial debt.

Of the three ill-fated and highly controversial state-guaranteed debts—worth a total of $2bn—that are in default, Mozambique is now challenging one in court, and says it is close to restructuring the other two: one sovereign bond, and the other a privately-held syndicated loan. A successful restructure of the sovereign bond would provide a benchmark to price ENH's debt; but in the meantime, the continuing uncertainty could mean a significant gap between FID and financial close.

The ExxonMobil- and Eni-led Rovuma LNG project will not be far behind. Like a parent giving a child a consolation present at their sibling's birthday party, the Mozambique government approved the Area 4 plan of development at its council of ministers meeting on 14 May, exactly a week after President Felipe Nyusi's meeting with Anadarko chief executive Al Walker at which they agreed the FID date for Area 1.

The development plan obliges ExxonMobil and Eni to supply 500mn ft³/d of gas to the domestic market—a roughly equal proportion of production that Anadarko agreed for Area 1, which will deliver a total of 400mn ft³/d of gas. ExxonMobil and Eni's larger domestic gas obligation reflects the bigger size of its trains and the fact that Eni will not deliver any domestic gas from its floating LNG project on the Coral field.

Shadow of insecurity

The Area 4 partners also say they expect to provide up to 17,000 t/yr of LPG from their project to the domestic market—around half of Mozambique's current LPG imports. The government had hoped Sasol would supply LPG from its projects in southern Mozambique, but the South African company has dropped those plans.

But the Rovuma Basin gas projects' party is being spoiled by a continuing insurgency which the government seems powerless to stop. After a contractor working on the Anadarko project was killed on 21 February, work stopped on the projects on the Afungi peninsula, only restarting after Nyusi and Walker's meeting on 7 May.

In the intervening period, Cabo Delgado province was hit by Cyclone Kenneth, the first such storm to make landfall so far north in Mozambique since satellite tracking began in the 1980s.

The weeks running up to the cyclone saw a reduction in the intensity of insurgent activity, and the government acceding to Anadarko's demands to increase its security presence in Cabo Delgado. But almost as soon as contractors started returning to work, a minibus carrying at least two contractors was attacked on 10 May, and one was shot. So, there is still some way to go to ensure the projects can be constructed safely.

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