Call for more inclusion at this year's African Banker Awards
In File CoM
Mozambique’s first liquefied natural gas export project is under construction, two much larger developments are targeting final investment decisions in 2019, and the impoverished African nation of 30 million people could go from zero to the sixth-largest LNG producer in the world by the mid-2020s.
The two mega-projects — one led by ExxonMobil and Eni and the other led by Anadarko — have a combined development cost of $55 billion and would bring 28 million tonnes of annual liquefaction capacity on stream by 2025, Paul Eardley-Taylor, head of oil and gas for Southern Africa at Johannesburg-based Standard Bank, told a London audience Nov. 22.
Those two ventures, plus the smaller floating LNG project under construction and scheduled to enter service in 2022, also led by Italy’s Eni, would total almost 32 million tonnes annual capacity. That would put Mozambique just behind 35-year LNG exporter Malaysia and world leaders Qatar, Australia, the United States and Russia.
Eardley-Taylor gave the keynote presentation at the Africa Petroleum Club’s annual fundraiser dinner for wildlife and conservation projects: “Mozambique, Gas Supplier to the World?”
Global LNG trade is predicted to grow twice as fast as gas demand overall, the banker said, showing a chart of 12 different LNG demand forecasts stretching out as far as 2040. Starting with actual demand in 2017 of almost 300 million tonnes per year, the forecast average approaches 500 million tonnes by 2030.
Mozambique, with offshore gas discoveries of 150 trillion to 200 trillion cubic feet since 2010, is well positioned to serve the growing Asian market, Eardley-Taylor said.
The expectations for Mozambique go beyond start-up of the two onshore LNG plants, with the bank forecasting that expansions are likely.
“We expect four or five additional onshore (liquefaction) trains could be operational by 2029-2030.”
The first project to come online will be Coral South, which Standard Bank put at $10 billion for the all-in cost. Construction of the floating liquefaction and storage unit started in a South Korea shipyard after Eni, the project operator, and its partners made the final investment decision in 2017. BP has a 20-year contract to take 100 percent of the output from the 3.4-million-tonne-per-year project.
Of the onshore plants, Anadarko is the lead for the Mozambique LNG project, at 12.88 million tonnes per year, with the company committing to make an investment decision in the first half of 2019. The bank estimated the all-in development cost at $25 billion.
Anadarko is working to sign up enough LNG customers to sell its decision to project-finance bankers. As of mid-November, the company had announced sales to gas suppliers and utilities in Japan, Thailand, France and the U.K., totaling more than half the plant’s output, though not all the contracts have been finalized. Talks also are underway on LNG sales to Shell, Total and China National Offshore Oil Corp., the Natural Gas Daily reported Dec. 4.
The project already has started resettling residents to prepare the site for construction, according to the bank’s presentation in London.
India’s state-run Bharat Petroleum Corp. is a partner in the Anadarko project and will invest as much as $800 million equity for its 10 percent stake — the company’s largest investment in an upstream project overseas — Indian news media reported in October. Other partners with Anadarko include companies from Japan, India and Thailand.
At an initial capacity of 15.2 million tonnes and a $30 billion all-in price tag, the ExxonMobil/Eni-led Rovuma LNG project looks to take bids in the first quarter of 2019 for engineering, procurement and construction, the bank said.
ExxonMobil’s country manager in Mozambique has publicly confirmed that the company expects to make a final investment decision mid-2019. Partners in the development also include China National Petroleum Corp., Korea Gas and Galp Energia of Portugal.
By selling some of the plant’s output to their own affiliates, the partners could speed up financing for the development, the bank said.
“We expect sufficient interest from affiliate buyers to launch the project and support the financing,” ExxonMobil spokesperson Julie King told Reuters in July.
The company took over the lead role in the joint venture this summer for construction and operation of the LNG plant, while Eni will manage gas field development. To reduce production costs, ExxonMobil has decided to build the largest liquefaction trains in the world outside Qatar, at 7.6 million tonnes each.
Mozambique’s National Hydrocarbons Co. is a partner in both onshore projects and will need to borrow $2 billion to finance its participation, according to news reports in October. The country’s minister of economy and finance said the government wants to issue a sovereign guarantee for the $2 billion loan and has put it into its draft 2019 state budget.
However, the return of Mozambique to international capital markets will not be easy. Rating agencies classify Mozambique as in “selective default” because in 2013 and 2014 the government issued sovereign guarantees, also for about $2 billion, for loans taken out from European banks by three newly created security-related companies.
All three companies are now effectively bankrupt, and the government has defaulted on the loan repayments, arguing that creditors must agree to restructure the loans.
Mozambique reached an agreement with creditors to restructure some of the debt, including extending maturities and sharing future revenues from the LNG projects, the finance ministry said Nov. 6. Under the deal, creditors would receive 5 percent of Mozambique’s future revenues from the gas projects, with payments capped at $500 million.
Mozambique is one of the world’s poorest countries, having suffered through a 15-year civil war that ended in 1992, according to Standard Bank.
The country hopes that production of its offshore gas resources will provide increased supplies for domestic needs and spur development of fertilizer and petrochemical manufacturing plants along with construction of gas-fired power plants and pipelines to serve industry and households.
South Africa’s Sasol has been producing gas in Mozambique since 2004, sending most of it by pipeline to power plants in South Africa.Source: Alaska Journal
Mozambique may become one of the world's largest gold producers