Mozambique Hits Huge New Gas Reserve

In mid-January, Anadarko announced that its seventh well drilled offshore Mozambique had been successful. The Lagosta 2 well on Offshore Area 1 of the Rovuma Basin yielded the best results of any well in the area to date.

Bob Daniels, Anadarko’s senior vice-president for worldwide exploration, said: “These excellent results continue to support our recoverable resource estimates of 15 to 30 plus trillion cubic feet (tcf) of natural gas in the discovery area on our block, as well as provide additional information that will be incorporated into our models.”

The company believes that the field, which lies close to the Tanzanian border, could be one of the most important gas discoveries made anywhere in the world over the past decade.

Even 15 tcf would give Mozambique the second-biggest gas reserves of any country in sub-Saharan Africa, after Nigeria. Estimates vary, but it is generally reckoned that 5 tcf of dedicated reserves is sufficient to justify the construction of an LNG production system, known as a train.

Some gas could be consumed locally but domestic industrial and power generation demand is relatively limited and so LNG seems the obvious option. Gas is cooled to become a liquid that can then be put into tankers for shipping anywhere else in the world.

The only LNG producers in sub-Saharan Africa at present are Nigeria and Equatorial Guinea, although Angola will soon join this club. Mozambique could therefore become the first LNG producer in East Africa and would be well placed to supply expanding markets in India and China.

With 15-30 tcf of reserves, Mozambique could become an important LNG supplier, in addition to its emerging role as one of the world’s most important coal exporters. Indeed, the company has already discussed the possibility of developing a six-train LNG plant, which would require investment of perhaps $20bn and which would be one of the largest in the world.

Anadarko has a 36% stake in the project, alongside partners Mitsui E&P (20%), BPRL Ventures Mozambique (10%), Videocon Mozambique Rovuma (10%) and Cove Energy Mozambique Rovuma Offshore (8.5%).

In addition, state-owned Empresa Nacional de Hidrocarbonetos (ENH) has an option to take a 15% stake at a later stage, ensuring that the government of Mozambique will benefit directly, as well as through taxes, royalties and employment generation.

Tanzania to update gas laws

Neighbouring Tanzania is hopeful that it can join in the gas boom. Most of Mozambique’s discoveries have been made in the Rovuma Basin, half of which lies in Tanzanian territory. A consortium including Cove Energy also produces gas on Tanzanian acreage to supply a small power plant at Mtwara in the far southeast of Tanzania.

However, exploration efforts in the region are being stepped up on the back of the Mozambican finds and the government of Tanzania is keen to find a commercial outlet for its own reserves.

Gas is already piped from the Songo Songo fields offshore Tanzania to Dar es Salaam for power generation and other industrial processes. The existing pipeline could be extended south to Mtwara or a new pipeline constructed to take gas north to Tanzania’s biggest city and possibly to Mombasa and Nairobi in Kenya.

The Tanzanian and Kenyan governments have signed a preliminary agreement on the construction of a cross-border gas pipeline to enable Kenya to benefit from Tanzania’s good hydrocarbon fortune. The chairman of the energy and minerals parliamentary committee, January Makamba, said that new legislation was needed in order to enable the country to make the most its gas potential. Oil and gas exploration is currently regulated by legislation more than three decades old. Makamba said: “I personally think this law needs to be updated. In fact, it doesn’t even mention gas; it talks generally about hydrocarbons but the substance of the law dwells on oil. As a result, the gas sector in Tanzania is regulated by individual contracts – something that is not ideal.”