Mozambique: Africa’s New Powerhouse in LNG Gas Export Markets
Vast natural gas deposits were discovered in Mozambique’s northern Cabo Delgado province in 2010, representing the largest ever found in Sub-Sahara Africa. To date, the discovery of over 180 trillion cubic feet (TCF) of natural gas reserves has been made in the Rovuma basin in the north of the country. The discovery in Mozambique represents a lion’s share of Africa’s total gas reserves. Africa has over 620 trillion TCF of natural gas reserves, according to the British Petroleum’s 2021 Statistical Review of World Energy.
Mozambique achieved a major milestone on November 13, 2022, when President Filipe Nyusi announced the country’s first shipment. “It is with great honor that I announce the start of the first export of Liquefied Natural Gas (LNG), produced in the Rovuma, in Mozambique, by the Coral Sul FLNG Project,” the President remarked.
“The completion of this international venture is a sign of the recognition by the market that Mozambique offers a stable, transparent and predictable environment for the realization of multi-billion investments, where high technology stands out in order to monetize resources in a phase of the energy transition, therefore it must bring pride to all Mozambicans, ” President Nyusi continued.
The UK’s oil and gas giant, British Petroleum, is the off-taker of the first gas shipment under a long-term purchase and sale contract that will run for over twenty-years. The first shipment travelled enroute to the Suez Canal for likely delivery to Europe, the preferred destination for LNG cargoes in the wake of Russia’s invasion of Ukraine.
A Peek into the Investment Landscape and Players
Mozambique’s LNG sector has attracted major international investments, including major oil and gas companies, as well as governments. The sector, for instance, represents the U.S. Government’s largest investments on the African continent. The US’ Development Finance Corporation has extended $1.5 billion in sovereign risk insurance to Exxon Mobil’s Area 4 Rovuma LNG project.
A source of Mozambique’s first gas export, Area 4 or (Rovuma LNG) project is co-led by Eni and ExxonMobil. Eni leads all upstream operations, whereas ExxonMobil leads the construction and operation of LNG facilities onshore located in the Afungi LNG Park. A consortium consisting of TechnipFMC, JGC and Samsung Heavy Industries was awarded the engineering procurement and construction (EPC) contract.
The U.S. Export-Import Bank has committed a loan of $4.7 billion of the $24 billion investment into the Area 1 Mozambique LNG project, which is led by TotalEnergies and is expected to be the next major project to export gas from Mozambique.
TotalEnergies EP Mozambique Area 1 Limitada, a wholly owned subsidiary of TotalEnergies, operates the Mozambique LNG project with a 26.5% stake. It is in a joint venture arrangement with Mitsui E&P Mozambique Area1 Limited (20%), ENH Rovuma Área 1, SA (15%), ONGC Videsh Rovuma Limited (10%), Beas Rovuma Energy Mozambique Limited (10%), BPRL Ventures Mozambique BV (10%), and PTTEP Mozambique Area 1 Limited (8.5%). TotalEnergies selected a joint venture of contractors led by Saipem and McDermott to construct the facilities, including dedicated airstrip and port facilities located in the Afungi LNG Park.
TotalEnergies plans to build up to six LNG trains Area 1 project, the first two trains of which reached final investment decision (FID) in 2019 and which are valued at $23 billion. This project is targeting Asian and European markets for exports. Over 400 MMCF (Million Cubic Fee) of the project’s gas production is reserved for domestic uses.
The Area 1 project, first onshore development of a LNG plant in Mozambique, was postponed in 2021 due to security concerns in the Cabo Delgado Province where the project is located. Following discussions with TotalEnergies, Sapiem has recently agreed to restart work on the project this year.
“We expect to gradually restart the (Mozambique) project, according to the information received by our clients, starting from July this year,” Saipem CEO Alessandro Puliti said in a recent call on the group’s results for 2022. The contract for Area 1 project has a value of 3.5 billion euros ($3.72 billion) for Saipem, the Italian group.
Major Opportunities for Investment
The building of the LNG plants present great opportunities for equipment suppliers over the next five years. Two 180,000 cubic meter LNG storage tanks, condensate storage, a multi-berth marine jetty, and related utilities and infrastructure are all part of the LNG development plan. ExxonMobil’s development plan includes the building of two LNG trains, each of which will be able to generate 7.6 million tons of LNG annually, as well as the supporting infrastructure.
For investors interested in teaming up with the state institutions, the Government of Mozambique has determined that Empresa Nacional de Hidrocarbonetos (ENH), the state-owned hydrocarbon company, represents its interests in petroleum operations, both exploration and production projects.
ENH is currently engaged in key national projects, such as the oil and gas terminal expansion in the Port of Pemba, and the urbanization of the district of Palma, where the Area 1 and 4 natural gas business activities are located. Through a partnership with the Korean gas company Kogas, ENH also operates a gas distribution network to provide households and industry with piped gas in Maputo.
Mozambique is an ideal investment choice for companies interested in industrial projects. The Government of Mozambique has decided that a portion of natural gas production should be allocated for local use to address the needs of the domestic market. The National Petroleum Institute (INP), the industry’s regulatory agency, publishes tenders, with a view to identifying companies interested in developing industrial projects.
Advancing Investment in the Sector
In an effort to advance investment in the sector as a key stakeholder, ENH, in collaboration with AME Mocambique, the Ministry of Mineral Resources and Energy, and Ametrade UK, will co-organize the 9th edition of the Mozambique Mining & Energy Conference (MMEC). It is set to take place from April 26-27, 2023 at the Chissano Joachim International Conference Centre in Maputo, Mozambique. A premier gathering for investment promotion and policy dialogue, the event will bring together key stakeholders in the energy, mining, oil, and gas industries in Mozambique and the entire southern African sub-region.
To learn more please visit www.mmec-moz.com