East Africa keeps faith with LNG
Tanzania and Mozambique are home to East Africa’s largest natural reserves, with a combined capacity of nearly 250 trillion cu feet (tcf). In recent years, both countries have moved to develop these vast fields but slow government regulation has at times hampered progress, as has inadequate infrastructure and weak international prices.
Italy’s Eni and US-based Anadarko Petroleum are developing straddling reservoirs in the Rovuma Basin off the northern coast of Mozambique. The partners hope to deliver LNG from the 24 tcf reservoir by 2020.
Eni has discovered some 85 tcf of natural gas in Mozambique and Anadarko has unearthed some 75 tcf, enough to transform the country into a world-class producer of natural gas. Last year, the partners reached key milestones, including selecting a contractor for the initial onshore development, estimated to cost US$15 billion.
The project in Mozambique comprises two LNG-processing trains. Anadarko says the partners have so far reached long-term offtake sales contracts for more than 8 million tonnes a year (mta).
The majors felt the location of the project on the east African coast would be ideal for large LNG facilities, built to export gas to Asia’s energy-hungry markets. Now, however, with the emergence of a global supply glut, questions remain over the project’s final investment decision.
Oil and gas companies worldwide have been delaying big development projects after the sharp fall in oil prices, to which the price of Asia’s long-term LNG-supply contracts remains tied. However, Anadarko maintains that, with many projects on hold due to low global prices, “now is the time to move forward” with low-cost projects in areas such as Mozambique.
Meanwhile, plans have been finalised to acquire land for building an LNG plant along Tanzania’s Indian Ocean coast. Some 55 tcf has been discovered in the country so far. Developing these resources will transform the Tanzanian economy over the next 10 years into a middle-income nation, according to the country’s central bank.
Today, Tanzania produces around 300 million ft3 of natural gas to fire electricity plants. However, state energy company Tanzania Petroleum Development Corp predicts that this could more than triple by 2020, enabling the country to export liquefied gas to regional and Asian markets.
Shell’s recent acquisition of the BG Group raises the prospect that developing these resources may gather pace.
BG’s partners in Tanzania LNG include Statoil, Exxon Mobil and Ophir Energy. They plan to build an onshore LNG export terminal in partnership with state-run Tanzania Petroleum Development Corp, to start in the early 2020s.
Despite the unfriendly business environment, however, KPMG Africa senior manager energy and natural resources Jean Githinji believes that “government flexibility can keep projects going”.
Critics have blamed government indecision for holding back projects such as Tanzania LNG. Earlier this year, however, Tanzania’s recently elected president John Magufuli pledged to speed up government decisions on key investment projects.
This year has brought more indications that things may have started to move at last. In February, Tanzania announced that it had secured 2,070 hectares of land for the project.
This removes a major hurdle for the long delayed LNG-production plant.
Analysts believe that both countries’ projects remain competitive. KPMG Africa International Development Advisory Services associate director Mark Essex says that although low oil and LNG prices “challenge the economics of greenfield LNG projects”, the schemes in Tanzania and Mozambique “appear highly cost-competitive and well placed to supply Asia”.
Source: LNG World Shipping