Mozambique is finally joining the ranks of liquefied natural gas (LNG) exporting countries, with the first shipments from ENI’s Coral-Sul 3.4m tonnes/year (t/y) floating LNG project due imminently. But any celebrations over that landmark will be tempered by continuing uncertainties over the future of much larger onshore LNG projects, whose development have been disrupted by violent unrest.
Coral-Sul, located safely offshore with its production facility brought in pre-built from South Korea, was supposed to be the low-risk precursor to two more ambitious onshore projects planned for the Afungi peninsula in northern Mozambique. The region is adjacent to the country’s substantial offshore gas reserves, which are estimated at some 100 trillion cubic feet, the third largest in Africa after Nigeria and Algeria.
Security situation holds back progress
The revenues and jobs these provide could transform the economy of Mozambique, one of the world’s poorest countries. But little progress has been made on construction of the TotalEnergies-led Mozambique LNG (MLNG) plant and the proposed ExxonMobil-led Rovuma LNG (RLNG) plant that would neighbour it, since attacks by Islamist insurgents on site workers and others in the region caused construction to be halted in early 2021.
TotalEnergies withdrew all its staff from the region in April 2021, when it declared force majeure on its 12.8m t/y project. ExxonMobil has yet to take a final investment decision on its project, which was conceived as a two-production train 15.2m t/y facility.
TotalEnergies’ CEO, Patrick Pouyanné, said in January that the company’s objective was to restart work on its $20bn project in 2022, but he also said this wouldn’t happen until life in the region was “back to normality”. Although an international effort to quell the insurgency, led by Rwandan forces, has reduced the level of unrest, there is little indication that the international companies plan to return imminently.
Arun Kumar Singh, the head of India’s Bharat Petroleum, which holds a 10% stake in MLNG, told his company’s annual general meeting in August that he was hopeful work would resume on the export plant in the first half of 2023, but also said any resumption was dependent on a sustained stabilisation of the security situation.
Companies weigh alternatives
ExxonMobil, meanwhile, has said little on the record about its onshore plans, referring only to imminent exports from Coral-Sul FLNG, in which it has a stake, in its second quarter earnings call. However, the company is reportedly weighing up the merits of switching its plant design to a modular one, which has proved successful recently in the US.
Rather than building two large production trains with a capacity of around 7.5m t/y each in situ, a modular approach would involve using smaller, easier-to-install production modules which could be up and running in almost half the time of conventional trains.
While the initial output would probably be less than originally envisaged, the use of modules would enable the project to be scaled up relatively quickly later if possible. The flexibility and limited upfront expense of the modular approach means it is being adopted for new LNG projects elsewhere in Africa and further afield.
Claudio Descalzi, ENI’s chief executive, told his company’s second quarter earnings call in July that an expansion of offshore LNG production to add to that from Coral-Sul FLNG may be the quickest way to get more Mozambican LNG to world markets. That may depend on progress with ExxonMobil’s RLNG project, in which Eni has a stake and which would provide an alternative outlet for Eni’s gas reserves.
Both modular LNG and FLNG offer the prospect of speeding up LNG exports and thus speeding up the influx of export revenues for both the producers and Mozambique’s government. Neither would make the same social and economic impact for Mozambique in the shorter term as building large-scale trains, which would generate more export revenues and local jobs.
But if the country is to take advantage of the current global dash for gas supply due to the fallout from Russia’s invasion of Ukraine, then these faster-to-develop projects may prove to be the favoured options.
Tanzania’s export plans get new lease of life
The hunt for fresh gas supply may also yet help get Tanzania’s long-stalled efforts to exploit the gas reserves in its share of the Rovuma basin off the ground too.
The two companies lead a consortium that also includes ExxonMobil, Ophir Energy and Pavilion Energy. Offshore Block 2, operated by Equinor, is estimated to hold more than 20 trillion cubic feet of gas, while Block 1 and Block 4, operated by Shell have estimated recoverable gas reserves of 16 trillion cubic feet.
Shell and Equinor had been in talks for years with the government of Tanzania’s late President John Magufuli over the construction an onshore LNG development up to his death in 2021. But a failure to agree terms in what was then an unfavourable global gas market eventually led to a diminution of interest among the oil and gas companies. Equinor took a took a $982m writedown on the project in 2021.
However, the process seems to have gained a new lease of life under new President Samia Suluhu Hassan, as rising gas prices make the economics of the project more favourable to both sides. Tanzania signed a framework agreement with Shell and Equinor in June 2022 to build the $30bn 10m t/y export terminal in Lindi, southern Tanzania.
Energy minister January Makamba said at the time a final investment decision would be made by the companies in 2025 on whether to proceed Makamba also told Shell during talks in the Netherlands in early September that the government was serious about the LNG project and said that areas of dispute over the HGA would be resolved by December, according to Tanzanian newspaper The Citizen.
Tanzania is not immune to the unrest afflicting northern Mozambique, which has occasionally spilled over the border, so any decision to push ahead with the onshore project will also be made with reference to the security situation.