Anadarko May Not Decide on Mozambique Gas Until 2018, ENH Says

MAPUTO (Capital Markets in Africa) – Anadarko Petroleum Corporation isn’t likely to make a final investment decision on its $20 billion liquefied natural gas project in Mozambique before the end of next year, even as it races to get the fuel to markets ahead of rivals, its state-owned partner said.

The venture may look at options to speed the process up, such as selling at a lower price to international LNG traders who would collect gas at the project site rather than waiting to finalize contracts with end users, said Omar Mitha, chairman and chief executive officer at Empresa Nacional de Hidrocarbonetos.

“It all depends on the operational model,” Mitha said Thursday in an interview in Maputo, Mozambique’s capital. “That kind of trade-off could be reasonable bearing in mind the requirement to fast track, be on the market, and take advantage of that window of opportunity.”

The company is working toward turning pledges from buyers into long-term agreements and is making “great progress” toward making a FID, Helen Wells, a spokeswoman for Anadarko, said by email. She declined to comment on the time frame.

Seven years since making one of the biggest gas discoveries in decades in the Rovuma basin off Mozambique’s northern coast, Anadarko and its partners are racing to get the fuel to market before rival projects come onstream. Italy’s Eni SpA signed off on a $7 billion offshore LNG project adjacent to Anadarko’s Area 1 this year. The two discoveries could catapult Mozambique, one of the world’s poorest countries, to being the fourth-biggest LNG exporter globally, according to President Filipe Nyusi.

Shale Glut
Mitha’s forecast is later than Anadarko’s other partners. ONGC Videsh Ltd. said earlier this month the final investment decision would come by next June, and Mitsui & Co., the second-biggest partner, said this year it expected a FID in April.

Anadarko needs to enter long-term sale agreements for at least 8 million to 9 million tons a year of the 12 million tons it will produce at Area 1, John Bretz, the company’s country manager in Mozambique, said in a speech earlier this month. So far, it’s agreed to sell 2.6 million tons a year to PPT Pcl of Thailand.

The emergence of shale gas in the U.S. has created a glut and depressed prices. This will change, and buyers will need new suppliers to come into production from 2022 to 2025, according to Bretz, whose company has a 26.5 percent stake in the Mozambique project and is the operator.

The partners are looking to sell the gas to Japan, South Korea, and Europe, “even though we know that Russia and Norway are very big competitors,” Mitha said.

The project could also sell gas to Pakistan, Jordan, and Bangladesh, even though these countries would take lower quantities on shorter contracts, said Mitha. They might also be below investment grade, which makes financing the project more difficult.

Another requirement before FID is reaching a resettlement agreement for the communities that will be displaced by the project. Bretz hopes this will happen “imminently.”

Source: Bloomberg Business News