Mozambique: Start of Rovuma LNG production may be postponed to 2030 – Platts Analytics

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Mozambique: Start of Rovuma LNG production may be postponed to 2030 – Platts Analytics

3:31 CAT | 16 Apr 2020

File photo: Lusa

The consultancy S&P Global Platts Analytics says that the decision announced a week ago by US major ExxonMobil to delay the final investment decision on the Rovuma LNG project in Mozambique may delay the first export of natural gas from 2025 to 2030.

“The risk around investing in the project is exaggerated by the fact there are no known capacity off-takers, with export capacity instead contracted to equity holders in line with their ownership stake,” analyst Luke Cottell warned.

Cited on the energy information site S&P Global Platts [www.spglobal.com/platts/en], Cottell added that “Platts Analytics believes ExxonMobil will shelve this project until the economics are more favourable, with first production from the project not forecast until 2030”.

The Rovuma project, led by US oil company ExxonMobil, is the largest of the three large liquefied natural gas projects under development in Mozambique, and operations were expected to begin in 2025. But it now seems likely that they will be postponed.

This month, the oil company officially announced the postponement of its Final Investment Decision, citing the difficult operating conditions resulting from the global economic slowdown and the reduction in the price of raw materials due to the decrease in demand, following the measures enacted to contain the spread of the Covid-19 pandemic.

ALSO READ: Delay to Rovuma LNG latest setback for Mozambique LNG sector

“ExxonMobil continues to work actively with its partners and the Government to optimise development plans, improving synergies and exploring opportunities related to the current low price environment,” the oil company argued in the statement announcing the postponement, sine die, of the project.

“The first sign of trouble was the missed 2019 FID timeline, which was an indication that there were potential issues remaining which the partners had yet to fully address,” analyst Joseph Gatdula of Fitch Solutions also commented.

“The glut of LNG supply and a recent sharp fall in oil prices, often used to set LNG prices, has only raised the risks for the challenging project economics,” he added. “The timing, while not a complete surprise, will certainly be viewed as a setback for Mozambique.”

Gas prices fell to lowest ever in April

In addition to the ExxonMobil-led project, the other two major natural gas projects in Mozambique are those operated by Total, which should start in 2024, and the Coral South floating platform project led by Eni.

Source: Lusa