Vector icon depicting a modern oil refinery. FILE PHOTO | NMG Last week I attended an oil and gas brief by Standard Bank (Stanbic) on business opportunities available in the fast evolving natural gas developments in offshore Mozambique, an area that has been acknowledged as a top future global exporter of Liquefied Natural Gas (LNG).
With total natural gas reserves of 150-200 tcf (trillion cubic feet), Mozambique is now one of the major natural gas basins in the world. As much as $128 billion capital expenditure will be spent in Mozambique by major oil companies over the next five years.
LNG is natural gas (methane) chilled into liquid at very low temperatures for ease of storage and marine transportation. Natural gas is also transported in pipelines at ambient temperatures. LNG is different from Liquefied Petroleum Gas (LPG) which is a heavier gas (butane) liquefied under pressure, and which is usually sourced from crude oil refining.
Unlike in Tanzania, Uganda and Kenya where timelines for oil and gas final investment decisions (FID) are still uncertain, Mozambique is way ahead with FIDs. One investor consortium led by Total committed FID last year, with a major financial closure already done targeting first LPG export shipment by 2022. The other investor consortium led by ExxonMobil is nearing its FID with first LNG exports planned for 2024.
Unlike with crude oil, by the time FIDs for LNG projects are finalised, long term export/sale agreements have already been signed with major consumers across the world which limits investment exposure by pre-committing sales volumes and pricing structure. In the case of Mozambique, LNG exports are destined to India, China and other Far East destinations. Relatively short distances to Asia favour Mozambique LNG.
Interestingly, the ongoing LNG developments are in the same Rovuma Basin immediately across the border with Tanzania, where similar offshore LNG projects are yet to be committed, with the Tanzania government yet to finalise investment frameworks with the investors.
However, it is important to mention that Tanzania has already commercialised its onshore natural gas production into 600MW of power generation, while fuelling a number of key industries with piped natural gas. This has permitted Tanzania to back out use of high carbon imported fuel oil. Similarly, Mozambique has been exporting natural gas by pipeline from its onshore production to South Africa since 2004.
Mozambique oil and gas has succeeded where its regional neighbours have failed for a number of strong reasons. […]