Gas exports: If Mozambique succeeds in becoming a regional export hub, gas infrastructure will flourish in the next 15 to 20 years, leading to a boom in the country’s gas sector

New analysis from Frost & Sullivan indicates that Mozambique has the potential to become the liquefied natural gas (LNG) regional export hub due to Anadarko Petroleum Corporation and Eni SpA striving to meet all the conditions necessary to reach a final investment decision by the end of 2015 or early 2016.

The analysis, ‘Mozambican Gas Sector: Major Opportunities Across Multiple Industries’, takes into consideration the anticipated deployment of gas monetisation strategies; including LNG export terminals, gas-to-power projects and possibly petrochemical plants, which have the potential to unlock the country’s vast natural gas production capability.

It will create the impetus to build massive energy and industrial infrastructure, which will then benefit the economy at large, says the research.

Frost & Sullivan Energy and Environmental Industry analyst Celine Paton explained: “Anadarko is developing a first phase onshore 2-train LNG facility with a capacity of six million metric tonnes per annum, for an estimated $26 billion (ZAR321 billion).

“Last month, the company selected a consortium comprising of Chicago Bridge & Iron Company, Chiyoda Corporation, and Saipem SpA as EPC contractor for the initial development of the onshore LNG park.”

Paton added: “Eni is also looking at building two floating LNG units, whilst hoping to participate in the onshore facility with Anadarko. According to Eni, the Coral South FLNG project is anticipated to reach a final investment decision in the second half of 2015.”

Anticipating investment opportunities

Urbanisation projects around Palma, together with an integrated oil and gas (O&G) logistic services hub in Pemba, are expected to accompany the construction of the LNG facilities in the Cabo Delgado Province. This is one of the country’s least developed provinces, hence providing investment opportunities within the O&G construction industry.

Paton said: “The implementation of plans for LNG export facilities, in particular, will catalyse massive energy and infrastructure opportunities over the next five to 10 years.”

She added: “Although most of the gas produced in Mozambique is expected to be exported, 25% of the production will serve domestic purposes as required by the Petroleum Law revised in 2014.”

Where projects are dispersed geographically, the construction of transmission and distribution gas pipelines throughout the country will benefit small and medium-sized enterprises, which could easily access gas distribution networks.

Lengthy negotiations hamper progress

A few conditions are still pending such as securing binding gas supply agreements. Additional factors, like lengthy negotiations regarding possible sale of stakes by Anadarko and Eni in Area 1 and Area 4, could further delay final investment decision to 2016.

“While addressing regional demand for natural gas would be ideal for Mozambique, cross-border supply agreements might trigger complex security issues,” says Paton.

“Moreover, Mozambican gas may have to compete in the long term with Tanzanian gas, as well as potential untapped resources (shale gas, coal-bed methane, and coal, not forgetting the emergence of renewable energies) in Southern Africa.”

If the government succeeds in creating an investor-friendly climate and the global market conditions render projects economically feasible, gas infrastructure will flourish in the next 15 to 20 years, leading to a boom in the Mozambican gas sector, the report concludes.