Mozambique Background: Discovery & Regulation
Anadarko and Eni made significant discoveries offshore Mozambique in Offshore Area 1 and Offshore Area 4, respectively, in the Rovuma Basin in 2010/2011. Energy analysts believe there is as much as 120 tcf to be had. The consortiums are planning two LNG facilities (trains) each, certainly with onshore facilities, but possibly with a floating LNG plant as well. Both operators are in the final stages of engineering, procurement and construction contracts.
The Rovuma Basin Decree Law, passed in December 2014, is expected to attract investors to the area and fuel onshore and offshore construction to bring these fields online. The Decree Law outlines the expected upstream royalty rates, details the process for unitization, sets out policy on foreign worker parameters and eases local currency demands on the developers. It does not specify the fiscal terms that will ultimately determine the profitability of the projects, but it does protect the investors for 30 years with the option to renegotiate the fiscal elements every 10 years. It cannot, however, be treated in isolation. Where there is ambiguity, contractors should refer to previous legislation. Further legislation in an Oil & Gas Law is reportedly due through parliament in the near future, which should hopefully clarify these issues moving forward.
In the meantime, Mozambique’s future as a significant energy exporter relies on foreign direct investments to develop liquefied natural gas facilities. However, the shrinking economies of the major importers due to the recent oil price decline have impacted investment recruiting, according to Brunel’s Mozambique Country Manager Tresham Matthews. He hashas unparalleled insight in the current conditions in Mozambique, and he agreed to speak with OilPro to provide background for this post.
Bringing LNG to Market
Mozambique is driven to develop LNG quickly to fill export contracts before the early 2020s when LNG projects in Asia, Australia and North America will potentially flood the global markets with supply. Anadarko has a tentative start date of 2018 and 2019 for Eni. That’s only 3 or 4 years from now. Matthews thinks direct income from sales is likely to be at least 5 years from now.
The first phase of onshore development, the Pemba Logistics Base in northern Mozambique, officially called the Integrated Hydrocarbon Logistics Centre, is due for completion in 3Q 2016. Phase 1, which launched in August 2014, includes a 300-metre pier, facilities to produce and assemble undersea equipment, access roads and storage areas for equipment and mechanical workshops and two LNG storage units, each with a capacity of 180,000 cu m. The first phase has an estimated cost of over $150 million.