BUSINESS Mozambique set to cash in on massive liquefied natural gas project

MAPUTO: Mozambique is now “undoubtedly on the natural gas trade route”, declared President Filipe Nyusi on Thursday night, at a ceremony that gave the go-ahead to a multibillion-dollar project to set up a floating liquefied natural gas (FLNG) unit off the coast of the northern province of Cabo Delgado.

The FLNG unit will sit above the Coral South gas field in Area Four of the Rovuma Basin. This is 50km offshore at a depth of between 1 500 and 2 600m. During exploration 15 wells were drilled, and the known reserves in Area Four are over 85 trillion cubic feet of gas. Coral South is a “structuring project” for our economy, Nyusi said, which “will have a great impact on our lives”. The signing of the agreement on the FLNG project marked an end to the moments of “hesitation, uncertainty and nervousness” that had preceded it.

Under Thursday’s agreement the Area Four consortium has five years to complete the project. Liquefied natural gas exports should thus begin in mid-2022. The FLNG vessel will have the capacity to produce 3.4m tons of liquefied gas a year.

All the gas from the FLNG unit will be exported, under an agreement reached with British Petroleum, which may disappoint those who expected at least some of the gas to be sold on the domestic market. But the FLNG unit is just the start, and Coral South is only one of several gas fields discovered in the Rovuma Basin. The next step will be to process gas from the Mamba field, also in Area Four, in an onshore facility to be built on the Afungi Peninsula in Palma district. The operator of this facility is expected to be the US petroleum giant, ExxonMobil.

The final investment decision on Coral South, Nyusi added, would mean a change in the international perception of Mozambique, and the revenues that would be forthcoming would reduce the deficit on the country’s public accounts. The Italian energy company ENI is the operator of Area Four, and its chief executive officer, Claudio Descalzi, declared that the project was “very robust”, with 15 banks and other financing agencies committed to lending around $6 billion (R77bn) of the $8bn that the project requires. These figures do not include the $2.8bn already invested in Area Four.

The $6bn was just the start – when other Area Four gas projects came on stream, investment could rise to “30, 40, 50 billion dollars”, he said.

“We cannot miss this oppor- tunity, we cannot fail”, said Descalzi. “The eyes of the world will be on Mozambique. We have to achieve.”

The Area Four consortium is led by ENI-East Africa, with a 70% holding. That stake is divided into 20% for the Chinese company CNPC, and 50% for ENI itself, which has signed an agreement to sell half of this to ExxonMobil. The other partners, each with 10%, are Kogas of South Korea, Galp Energia of Portugal, and Mozambique’s own National Hydrocarbon Company. The chief executives of all these companies signed the final investment decision on Thursday.

Engineering contracts were also signed, to build the FLNG vessel, to drill six offshore wells, and to link them to the vessel by a network of cables, known as umbilicals, risers and flowlines.

FLNG technology is relatively new. To date only one FLNG vessel is in production, in Malaysia, and a second is being built in Australia. – Independent Foreign Service