Model gas contracts could be approved this week – AIM report

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Model gas contracts could be approved this week – AIM report

10:46 CAT | 31 Jul 2018

File photo: Macauhub

The government of Mozambique could later this week approve model exploration and production concession contracts paving the way for a new wave of gas exploration.

In 2015, the National Petroleum Institute (INP) announced the results of the fifth licencing round for exploration and production of hydrocarbons in fifteen blocks. Four companies successfully bid for six blocks: the Italian company ENI, US giant ExxonMobil, South Africa’s Sasol, and London-based Delonex Energy.

Three further companies came on board as non-operator partners: the Russian company Rosneft is the partner of ExxonMobil; the Norwegian company Statoil will partner ENI and Sasol; and the Indian Oil Corporation was partnered with Delonex Energy.

According to Monday’s edition of the daily newspaper “Noticias”, the signing of the contracts will lead to over three billion US dollars in investment in the country over the next eight years, including 700 million dollars in the first four years.

The approval of the model contracts will mark the end of a long negotiating process that began almost four years ago.

Speaking to the press, Martinho Tavares, the director of research and production at Mozambique’s publicly owned National Hydrocarbon Company (ENH), explained that if all goes to plan the first contracts will be signed during August.

Tavares noted that Delonex has decided not to proceed with its participation. However, he said that nothing is lost as the block can be included in future licencing rounds launched by the INP.

The advisor to ENH, Arsenio Mabote, added that “in addition to waiting for another licencing round, INP has the legal option to award blocks directly”.

The delay in agreeing the exploration and production concession contracts was due to intense negotiations between the government and the oil companies. Among the issues raised by the companies were inconsistencies in the petroleum law and other legislation relevant to their activities.

The companies also pushed for, and received, the adoption of a special exchange rate regime and the revision of the fiscal law covering hydrocarbon operations.

Another issue that has been resolved is the clarification of the requirement of the companies to be listed on the Mozambican Stock Exchange.

Mozambique has huge known reserves of natural gas, principally off the coast of the northern province of Cabo Delgado. The operators of the two blocks containing the gas, the US company Anadarko and ENI, both intend to take their final investment decisions next year on projects to liquefy the gas for shipment to international markets.

The two companies are competing over which will be the first to open an LNG facility on the Afungi peninsula. ENI is working with its partners, including the US giant ExxonMobil, on its final investment decision for the construction of its 15.2 million tonnes per year LNG facility based on gas from Offshore Area Four. This will be larger than the LNG project proposed by Anadarko and its partners in neighbouring Area One, which envisages two trains each producing six million tonnes of LNG per annum.

Anadarko has pencilled in 2023/24 for the start of production, whilst ENI is looking at 2024.

ENI has already taken its financial investment decision to develop a floating liquefied natural gas (FLNG) project in Area Four. The FLNG platform is to start production in 2022, with a capacity of 3.4 million tonnes of a year.

Source: AIM