Mozambique to speed up with $15 billion LNG project as a global glut looms

Mozambique is racing to tap gas from one of the biggest discoveries in decades as a global glut looms. After making its initial discovery six years ago in the Rovuma basin off Mozambique’s northern coast, Anadarko has yet to make a final investment decision on a $15 billion liquefied natural gas project. That decision may come this year as competition from US and Iranian supplies intensifies in export markets, said state-owned partner Empresa Nacional de Hidrocarbonetos (ENH).

“Unless we speed the process, we could lose the opportunity,” Omar Mitha, chairman of ENH, said in the capital, Maputo. We are discussing with the government that this is the time “to get ready with all the contracts, the legal framework, the resettlement process,” the former deputy minister said.

With the International Monetary Fund (IMF) projecting total LNG investment of more than $100 billion in Mozambique and the possibility of supplying gas to the domestic market, the discoveries have the potential to help transform one of the world’s poorest nations. While the Texas-based Anadarko has joined oil majors in curbing investment as crude slumps, the company said that it hopes to conclude negotiations with the Mozambique government this year.

Anadarko needs to finalize legal issues, including marine concessions that dictate ownership of the planned export jetty in Cabo Delgado province, and complete LNG offtake agreements before taking a final investment decision, John Peffer, the company’s manager in Mozambique, said.

“The key is to finish the legal and contractual framework as quickly as possible as this is a critical element in providing project certainty and securing long-term economic value,” Peffer said.

Anadarko, which owns 26.5 percent of the project, and its partners also need to get approval for resettling about 500 people at the project site, Peffer said. Displaced fisherman will be eligible for compensation, according to a draft of the plan. Despite pricing pressures as crude slumped to the lowest in more than a decade, the company remains confident about the prospects in Mozambique.

“The size of this asset, reservoir quality, distance to shore, proximity to the market, and continued progress with the government on the required legal and contractual framework will enable this project to differentiate itself and compete in today’s LNG market,” Peffer said.