After numerous years of challenges, Mozambique liquefied natural (LNG) project reached its final investment decision (FID), making the $20 billion project one of the largest investments in Africa and also one of the largest Greenfield LNG facilities to have ever been approved.
“At $20 billion, the FID is the largest sanction ever in sub-Saharan Africa oil and gas,” said Jon Lawrence, an analyst with Wood Mackenzie’s sub-Saharan Africa upstream team.
Meanwhile, there is still uncertainty on when the FID on Nigeria LNG Limited Train 7 will be taken after the signing of the Front End Engineering Design (FEED) contract in 2018. The NLNG Train 7 expansion project aims to increase the company’s production capacity from 22 metric tonnes per annum to over 30 MTPA.
As a result of the delay on NLNG Train 7, here are reasons why the Mozambique LNG FID should pile more pressure on Nigeria;
Being on the African east coast, the Mozambique LNG will be quite competitive and they can sell LNG to both the lucrative Asian market, home to 75 percent of global LNG demand, and to the flexible European market, which helps balance global LNG trade by soaking up excess supply.
Also, delay in reaching FID on Train 7 may lead to further construction delays and cost blowouts as there are a limited number of contractors able to handle the huge projects, experts say.
“Unless you are in FID in the next two years, there is going to be no one to build your project,” Ian Munro, Oil Search executive general manager said at Australian Energy Conference.
Also, Martin Houston, co-founder of Tellurian Inc, said LNG developers who fail to sign major contractors, such as Bechtel Corp or Chiyoda Corp, who can offer fixed price construction contracts are likely to struggle to make much profit.
According to estimates by consultants Wood Mackenzie, around $200 billion in projects across the globe are racing to be approved, vying to provide around 65 million tonnes of new annual supplies that are needed by 2025.
The Mozambique LNG project is based on natural gas from Area 1 in the Rovuma Basin making it the country’s first onshore LNG development with total capacity of 12.88m tonnes per year. It involves building infrastructure to extract gas from a field offshore northern Mozambique, pump it onshore and liquefy it, ready for further export by LNG tankers.
The project is led by US energy firm, Anadarko Petroleum that was subject of take-over tussle between Chevron and Occidental recently. Other members of the consortium include Mozambique’s state energy firm ENH, Japan’s Mitsui, Thailand’s PTTEP and ventures in which Indian firms ONGC, OVL and Bharat Petroleum have stakes.
The project is expected to transform Mozambique’s economy, especially as the poor nation is plagued by economic crisis, conflict stemming from a civil war and serious governance malady. The government of Mozambique expects the project to create more than 5,000 direct jobs and 45,000 indirect jobs.
