Gas development in Angola and Mozambique

Last month, Angola sold its first liquefied natural gas (LNG) cargo from its $10 billion gas plant, which is said to be the largest single investment in the nation’s oil and gas sector. Nigeria, however, has continued to drag its feet over the $16 billion Brass LNG and Nigeria LNG Train-7 projects with several disruptions to LNG exports.

The Angola gas shipment underscores the huge investment by multi-national oil companies into the country’s expanding, well-run and supported oil industry. The LNG project, with a capacity of 5.2 million metric tons a year, was bankrolled by Chevron, which, according to Bloomberg, plans to spend more than $77 billion on two LNG projects in Australia.

Enter Mozambique. As doubts over future investments in Nigeria’s oil and gas industry linger, Asian giants India and China have pitched themselves in the deep waters of Mozambique – home to the world’s biggest gas discovery in a decade – for a higher stake in global energy assets.

Mozambique may have 250 trillion cubic feet (Tcf) of reserves, according to Empresa Nacional de Hidrocarbonetos, the country’s state-backed energy company. Nigeria’s natural gas reserve base is estimated at over 180 Tcf.

With huge discoveries of offshore gas in Mozambique, the country has become one of the world’s top destinations for energy investment as companies including Anadarko of the United States and Italy’s Eni SpA (ENI) seek partners to develop the country’s offshore gas reserves. Anadarko Petroleum and India’s Videocon Industries are selling 10 percent each in Mozambique’s Rovuma-1 offshore block. Two Indian companies OVL and OIL have already signed agreements to acquire 10 percent participating interest in the block for $2.475 billion. China’s largest oil producer, China National Petroleum Corporation, has picked up a strategic 20 percent stake in ENI’s Mozambique asset, for $4.2 billion.

Lack of a coherent gas fiscal regime and tested gas pricing framework has been identified as the biggest challenge to gas investment in Nigeria. There is need for government to act decisively to stem the exodus of major players in the nation’s oil and gas landscape, which has been linked in some quarters to the uncertainty in the industry, in the face of the long delay in the passage of the Petroleum Industry Bill (PIB).

It is in light of this that we call on the legislature and the executive to ensure that the right PIB that would reverse the dwindling fortunes of the nation’s oil and gas sector is passed. Nigeria, which depends largely on earnings from the industry to service its budget, has seen its oil production and revenues drop in recent months.

Already, the decline in US imports of Nigeria’s crude oil and LNG due to its increasing domestic shale oil and gas production, and the potential export of her shale gas to the global LNG market have put pressure on Nigeria. In 2011, US imports of Nigerian LNG significantly decreased to 0.05 million metric tons (2.5 Bcf), according to data from the EIA, which is the lowest level recorded since Nigerian LNG exports began.