BMI View: Mozambique is likely to emerge as major LNG exporter by the end of the decade. US independent Anadarko stands to benefit from its position as operator of a potentially world-class LNG project in the country and is well-positioned to capitalise on the lucrative Asian LNG market.
US independent Anadarko Petroleum 's continued exploration success offshore Mozambique looks increasingly likely to see the country emerge as a major liquefied natural gas (LNG) exporter over the coming years.
Anadarko announced on October 5 that another major gas discovery at the Camarao prospect at its Offshore Area 1 block in the Rovuma Basin had led the company to upgrade its recoverable gas reserves estimate from from 169bn cubic metres (bcm) to 283bcm. In announcing the reserves upgrade, a senior executive at the company, Bob Daniels, said that with newly acquired 3D seismic surveys and an ambitious exploration and appraisal programme ahead, he was confident that those reserves would continue to rise over the next 12 months. Some analysts have predicted that reserves could rise to as much as 340bcm. Given Anadarko's remarkable track record to date, that figure looks achievable.
Anadarko's exploration success has led it to expand its LNG export plans. The company's 'base-case development plan' now envisions a minimum of two 5mn tonnes per annum (tpa) LNG trains providing send-out capacity of 10mn tpa, or 13.8bcm. Our analysis shows likely costs for upstream development and building of the plant of around US$20bn. There is some upside risk to this figure, however. The cost of building new LNG export capacity has risen rapidly over the last few years, as a growing number of projects compete for labour and resources. We expect a final investment decision on the project by late 2013 and first LNG shipments potentially as early as late-2018.
An aggressive exploration and appraisal plan will see the Anadarko and its partners drill 12 more exploration wells and up to nine appraisal wells at the Rovuma Basin block by the end of 2014. This could very well prove up enough reserves to add an additional 1-2 trains to the plant.
A project of that scale is world-class and raises questions over the its current ownership structure. Anadarko operates the permit with a 36.5% stake, working alongside Japanese conglomerate Mitsui (20%), Indian companies Bharat Petroleum Corporation Ltd (BPCL, 10%) and Videocon (10%), Cove Energy (8.5%), and Mozambique's state energy company Empresa Nacional de Hidrocarbonetos (ENH, 15% interest carried through the exploration phase).
However, that ownership structure is almost certain to change as the project moves on to the next stage. In particular, we expect Videocon and Cove Energy to start shopping around their stakes, as their share of project development costs is likely to stretch beyond their financial capacity. We expect strong interest in the project from global majors, particularly those that are investing heavily to meet soaring Asian gas demand. Royal Dutch Shell has already shown an interest in East Africa, where it has acquired exploration acreage in Tanzania, just north of Mozambique. This project would fit well in its LNG portfolio. US major Chevron is another company that is looking to boost its capacity to export LNG to the Japanese, Chinese, South Korean and Indian markets.
Copyright 2011 Business Monitor International Ltd. All Rights Reserved.
(Originally published in the November 1, 2011, edition of BMI Middle East and Africa Oil and Gas Insights.)