Ann-Marie Carbery Antoun, Director of Business Advisory at Contax Partners discusses how Mozambique is driving the region’s natural gas production
The Republic of Mozambique in East Africa is bordered by the Indian Ocean to the east, Tanzania to the north, Malawi and Zambia to the northwest, Zimbabwe to the west and Swaziland and South Africa to the southwest (Figure 1).
The capital of the country is Maputo, and the population is estimated at around 23.5m. Portuguese is recognised as the official language but Emakhuwa is the more widely spoken language in the East African country. In 2012, Mozambique came onto the Oil & Gas radar as a result of significant natural gas discoveries off the coast of the country.
These discoveries are driving Mozambique to position itself as an important natural gas producer, particularly due to the size of the reserves and the country’s relative proximity to Asian markets, as Africa appears to be a potential crucial supply point for China and other countries with expanding economies in Asia.
In this article, Contax Partners looks at the extent of these finds, what they mean for the country and what they mean for the players operating in the oil and gas space who are interested to grow their business in developing markets.
The offshore exploration area is split into six parts(Areas 1-6). Between October 2011 and March 2012, offshore exploration by ENI resulted in huge discoveries in Area 4, which at the time was assessed as having a potential of around 50 trillion cubic feet (tcf) of gas.
In April 2013, however, ENI announced the completion of its appraisal phase for its discovery in Mozambique, which resulted in more gas in place than first expected, a total of 80 tcf of gas in the Area 4 prospect.
Earlier this year, Eni agreed the sale of a 20 per cent stake in its Mozambique offshore project to the Chinese oil company, CNPC, in a deal said to be worth $4.21 billion. Final Investment Decision (FID) for the project is expected to be made by the end of 2014.
Meanwhile, in May 2012, Anadarko Petroleum Corporation of Texas also discovered a large offshore field in the Indian Ocean containing an estimated 20 tcf of recoverable gas in Area 1.
In mid-2012, Anadarko announced another discovery from the company’s Atum exploration well in the Rovuma Basin, and a few months later, the company concluded their appraisal drilling program stating that it had delivered outstanding results, with Area 1 alone approaching 100 tcf of gas.
To put these numbers in perspective, Qatar, holding the world’s third largest natural gas reserves and positioned as the single largest supplier of LNG today, is producing around 4.5 tcf of LNG per year. At the end of 2012, Anadarko awarded FEED contracts for Offshore Area 1, located in the Rovuma Basin.
The contracts were for offshore installation and onshore LNG construction. For offshore installation FEED, contracts were awarded to Technip, a JV between Subsea 7 and Saipem SA, and a JV between McDermott and Allseas.
Each contract will result in the delivery of an EPC plan for Offshore Area 1 development. Meanwhile, the onshore LNG FEED contracts were awarded to a JV between JGC Corp. and Fluor Transworld Services, a JV between CB&I and Chiyoda Corporation; and Bechtel.
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These contracts will result in the delivery of an EPC plan for two initial trains each with a capacity of five million tonnes per annum (mtpa).
These developments in Mozambique are exciting. Not only does the country represent a massive opportunity for contractors around the world looking at growth potential in developing markets, particularly driven by poor economies in their home countries (for example, in Europe and beyond), but it is also a great boost for the former Portuguese colony that until a couple of years ago was written off as a failed state due to civil war, governmental corruption and an extremely weakened economy.
These discoveries represent hope and value for the people of Mozambique, and are expected to lead to a host of potential opportunities arising in the country. But there will be huge challenges as a different approach will need to be taken to develop this country’s potential and to avoid the mistakes that have been made by oil companies exploring other African countries in the past.
As 2013 and beyond look set to be big years for Mozambique, where significant finds may represent some of the most important in the last 15 years, Contax Partners anticipates that the country will need to embark on a massive infrastructure development programme to enable the country to reach a stage where it is producing and selling LNG.
Drawing parallels with Qatar for example, which embarked on a similar journey in 1995 with a $2 billion project to build trains 1, 2 and 3 and which today has 7 LNG trains in production, a host of in-country challenges also have to be addressed. These included development of road infrastructure, port facilities, labour camp facilities, workshops, power stations, and many others.
In addition, the whole supply chain of LNG requires dedicated equipment from the LNG trains, required for production, to the LNG tanks for storage; export terminal to load vessels; and carriers for the transportation.
A host of opportunities are expected to emerge over the coming years in Mozambique for contractors with expertise in port facilities, camp building and all the other infrastructural requirements, in addition to the obvious EPC opportunities that will emerge from the actual development of the LNG trains.
In order to do justice to the country itself though, many CSR related steps will also need to be taken to ensure that the people of Mozambique benefit from the development.
Already key stakeholders involved in the development of these opportunities appear to be putting steps in place to ensure that the investment in the region is meaningful and that the government generates revenue which can be used to offer opportunities to the people of Mozambique.
There are some cases in Africa where significant oil and gas discoveries have led to economic ruin, but steps seem to be in the pipeline here to ensure that the growth will stimulate opportunity for education, employment and general improvements in the quality of living for the people of Mozambique.
Examples of this include the review of taxation and regulatory policies that is being conducted by the Mozambican government in order to ensure there is sufficient participation by the people of the country, and initiatives around improving the quality of education for the children of the Mozambique, and other similar initiatives.
Contax Partners will track the various development projects and initiatives taking place in Mozambique over the coming months and years with, and looks forward to seeing these plans come to fruition.
About the Author
Ann-Marie Carbery Antoun is the Director of Business Advisory at Contax Partners. To further discuss how the Business Advisory team can help you understand the project landscape, the potential realisation rates and likelihood to proceed tiers for your projects, the full set of opportunities open to you and the best strategy/approach to ensure the opportunities are successfully secured, please contact Ann-Marie Carbery Antoun at:
AnnMarie.Carberry@contax-partners.com
