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The Mozambican government expects to gain about 77.5 billion US dollars in taxes over the life span of the two liquefied natural gas (LNG) projects planned so far for the Rovuma Basin, off the coast of the northern province of Cabo Delgado.
Speaking in a two day question and answer session in the Mozambican parliament, the Assembly of the Republic, the Minister of Mineral Resources and Energy, Max Tonela, sad the first project to come on-stream would be the floating LNG facility planned by a consortium headed by the Italian energy company ENI in the deep waters of Area Four of the Rovuma Basin.
ENI and its partners took the Final Investment Decision on this project in June 2017, and the first steel parts for the floating LNG unit were manufactured in Singapore in March this year. The unit should be completed by the end of 2021, Tonela said, and arrive in Mozambican waters at the end of the first quarter of 2022, where it will be stationed above the Coral South gas field.
He expected the production of natural gas in Area Four to begin in the final quarter of 2022. The floating unit will have the capacity to produce 3.4 million tonnes of LNG a year.
Total investment, Tonela told the Assembly, is estimated at eight billion dollars. The various taxes that the ENI-led consortium should pay will generate revenue of 24.5 billion dollars for the Mozambican state over the lifespan of the project.
The second LNG project, developed by the US company Anadarko and its partners in Area One of the Rovuma Basin, is much larger. Anadarko’s Development Plan, approved by the government in February this year, envisages the construction of two LNG factories (known as “trains”) onshore, in the Afungi Peninsula, in Palma district. Each train will have a nominal production capacity of six million tonnes of LNG a year.
Tonela said that the Anadarko-led consortium has finalised long term contracts for the sale and purchase of five million tonnes of LNG a year. When the figure of guaranteed sales reaches nine million tonnes a year, the consortium will take its Final Investment Decision, expected in the first quarter of 2019. A start will be made on building the LNG trains in late 2020.
Anadarko and its partners are planning to invest around 30 billion dollars. Tonela said the onshore LNG plants will generate around 53 billion dollars in revenue for the Mozambican state.
The Minister added that the two LNG projects will create about 5,000 jobs in the construction phase, and about 1,000 jobs in the operational phase. He believed that 18 per cent of the goods and services needed by the projects could be provided by Mozambican companies, and 23 per cent by “companies associated with Mozambicans”.
Tonela added that the Rovuma Basin gas will make “a significant contribution to the industrialisation of the country, by making viable other projects that will use the gas”.
The first three of these projects have already been approved, using 400 million cubic feet of gas to produce fertiliser, electricity, and liquid fuels (diesel, naphtha and kerosene).
With the entry of the American oil and gas giant ExxonMobil as a partner in Area Four of the Basin, prospects were opened for further LNG projects.
“The presence of companies the size of ExxonMobil has confirmed that Mozambique remains a preferred destination for investment, thanks to the attractive legal framework”, said Tonela. “We are working with ExxonMobil, and hope to start discussing its development plan later this year, leading to an investment decision on the third LNG project in 2019”.
Asked about the rise in petrol and diesel prices that took effect on Thursday, Tonela said Mozambique has no choice but to keep domestic prices in line with world market prices for liquid fuels. Mozambique does not produce refined fuels, and so they are imported, mostly by private companies.
He warned that the current trend in world fuel prices is upwards. The Organisation of Petroleum Exporting Countries (OPEC), was restricting oil production, and some non-OPEC members, notably Russia, were following suit. Events in the Middle East (most recently US President Donald Trump’s widely condemned decision to stage a unilateral withdrawal from the nuclear deal with Iran) were also driving prices upwards.
Tonela noted that prices rose to over 79 dollars a barrel on Wednesday, and feared that they would rise further, to over 80 dollars and perhaps as much as 100 dollars a barrel.
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