Page 6 - AfrElec Week 45

AfrElec COMMENTARY AfrElec

Mozambique’s LNG plans: Is the

outlook optimistic or pessimistic?

Although Eni’s CEO has remained enthusiastic about multi-billion-dollar LNG projects, the
country’s economic and security challenges warrant attention

MOZAMBIQUE MOZAMBIQUE’S plans for turning offshore in the village of Aldeia da Paz earlier this week.
natural gas resources into an engine for eco- These setbacks were all the more disap-
WHAT: nomic growth and development have suffered at pointing for occurring as Total was success-
Mozambique’s gas sector least two major setbacks this year. fully arranging a major financing agreement
has suffered multiple On the one hand, ExxonMobil decided in for Mozambique LNG. The French firm signed
setbacks this year March to postpone a final investment deci- a credit deal worth $14.9bn with a group of 20
sion (FID) on the Rovuma LNG project. The banks and export credit agencies in July, and it
WHY: US-based giant had been slated to take this intends to use the proceeds of the loan to cover
The country’s offshore step before the end of 2020, but Mozambique’s most of the costs of its $20bn project.
gas fields continue National Petroleum Institute (INP) revealed
to have significant in June that the deadline for the FID had been Eni’s optimism
potential, but pandemic- pushed back to 2021. The delay stems from the At the same time, other international oil com-
related issues, the coronavirus (COVID-19) pandemic, which panies (IOCs) have remained very optimistic
failure of domestic has had such a negative impact on expectations about Mozambique. For instance, Claudio Des-
gas consumption of world energy demand that it has led many calzi, the CEO of Italy’s Eni, indicated during the
programmes and civil companies – including but hardly limited to Energy Intelligence Forum in mid-October that
unrest could thwart this super-majors such as ExxonMobil – to recon- he still saw the Coral South LNG and Rovuma
sider greenfield investment projects. LNG projects as good opportunities. (Eni is lead-
WHAT NEXT: On the other hand, the Mozambique LNG ing the Coral South LNG scheme and is working
The Islamist insurgency consortium, led by France’s Total, lost access to with ExxonMobil on Rovuma LNG.)
in Cabo Delgado is likely the port Mocímboa da Praia, which has been During a virtual discussion at the conference,
to pose the greatest serving as the main entry point for shipments of Descalzi noted that Mozambique’s offshore fields
short-term threat to gas equipment and goods for the project. The port held enough gas to support long-term devel-
development facilities were seized in August by Ahlu Sun- opment. He also described the economics of
nah Wa-Jamo (ASWJ), an Islamist group that Mozambican gas extraction as favourable.
has links to the Islamic State (Daesh). Thus far, “What we have to say about Mozambique is
Mozambique’s armed forces have not been able that the upstream is quite interesting,” he com-
to make much headway against ASWJ, which is mented. “It’s not very expensive. [There’s] a very
also known as Ansar al-Sunna. As a result, it has low break-even [point], as each well in terms of
been unable to prevent the militia, which aims boepd [barrels of oil equivalent per day] is rang-
to wrest control of the Cabo Delgado province ing between 35,000-40,000 boepd. The produc-
from the government, from committing atroci- tion rate is very good, so you don’t need to drill
ties such as the beheading of more than 50 people a lot of wells.”

P6 www. NEWSBASE .com Week 45 12•November•2020