New legislation prop Mozambique’s LNG to displace Nigeria, others

Mozambique’s ambition to displace Nigeria and other LNG producers in Africa like Algeria, Egypt and Equatorial Guinea is taking shape. Mozambique’s hopes to be the world’s third largest liquefied natural gas (LNG) exporter after Australia and Qatar by the end of this decade.

The country is pushing for the passage, before year-end, of legislation governing two major projects in the Rovuma Basin. The legislation will provide the legal, governmental and contractual framework for the LNG projects in Mozambique’s offshore blocks Area 1 and Area 4 – operated by Anadarko Petroleum and Eni respectively.

Once the law is passed, Mozambique will be able to develop and produce gas with support from these international oil companies (IOC) to export LNG to energy deficient consumers, particularly in Asia.

Anadarko leading the way

While waiting for Mozambique’s passage of the law, Anadarko has been progressing work on the Area 1 project. The firm, which commenced exploration drilling in Mozambique in 2010, has made sizeable gas discoveries, estimated at 50 to 70 trillion cubic feet (Tcf). The Prosperidade and Golfinho-Atum fields have independently certified reserves capable of supporting a development of 10 million tons per annum (Mtpa) each.

Meanwhile, advanced preparations have begun for early works at a 30 square mile site in the Afungi Peninsula in Cabo Delgado province in northern Mozambique, where the onshore liquefaction facilities for the Anadarko-operated Mozambique LNG project will be located. The government has also given its approval to Area 1 project’s environmental impact assessment report.

Eni forays

Eni made its first gas find at Mamba South-1 well in Area 4 block in October 2011 and the total resources discovered are estimated at approximately 85 Tcf. Of these, Eni revealed that at least 27 Tcf are located exclusively in Area 4, while the other 48 Tcf although located in the same block but is part of common resources straddling in the Area 1 block.

Eni indicated in its outline of the company’s strategy for 2014-2017 in mid-February that development of the straddling resources in Area 4 will require 15 Mtpa of plant processing capacity. This comprises an onshore LNG train and two floating liquefied natural gas (FLNG) facilities.

On the Coral field project in Area 4, Eni has commenced the process to reach FID for its development. To expedite development of the project, the operator has contracted three consortia in May to undertake FEED for a FLNG facility.

Mozambique close to economic boom

Development of the planned LNG projects in Mozambique could provide economic boom to the country. For instance, the Area 1 project using six LNG trains could generate an additional $39 billion to Mozambique’s economy by 2035 and contribute to growth in per capita GDP from $650 in 2013 to $4,500 in 2035, the Standard Bank of South Africa Ltd projected.

Other potential benefits from the Are 1 Mozambique LNG project include; large employment opportunities, totaling over 700,000 jobs by 2035 (with no construction delays). Of these, only 15,000 are directly associated with the LNG project, with the rest being indirect and induced jobs throughout the economy; a current account surplus of over $16 billion per annum; infrastructure improvements through direct, indirect and induced investments will include expanded transport infrastructure including air, roads and ports as well as improved water and electrical distribution systems and social support systems such as housing, health care facilities and schools; large financial gains for the government in the range of between $67 billion and $212 billion over the life of the project, depending on how many trains are ultimately constructed The country’s national oil company Empresa Nacional de Hidrocarbonetos E.P. (ENH), with a 15 percent and 10 percent stakes in Areas 1 and 4 projects, respectively is expected to take a leading role in developing the local petroleum industry.

To support the petroleum industry, the Mozambique government is spending $150 million to develop a logistics base at Pemba. When ready, the base will provide logistics services to petroleum producers and to oil and gas services providers, such as maritime firms, drilling contractors and other service companies.

On manpower, ENH’s Martinho pointed that Mozambique needs more skilled professionals such as builders, mechanics, radio operators, securities and others, welders, electricians, civil engineers, pipeline constructors. The country also has to build up its pool of higher skilled professionals, including geoscientists, engineers, geophysicists, environmental officials, lawyers, doctors and others.

Mozambique is looking further ahead in spite of the enormous work needed to bring the first two LNG projects into production.