Rising Export Opportunities to Anchor Mozambique as Regional Gas Hub, Finds Frost & Sullivan

Anticipated final investment decisions on LNG projects will facilitate massive energy and infrastructure expansions by 2016

Mozambique is a low-income country with an economy that is heavily reliant on subsistence agriculture, as well as a few mega projects in the aluminium, extractive and power industries. However, poor basic infrastructure is hampering economic and social development. The anticipated deployment of gas monetisation strategies; including liquefied natural gas (LNG) export terminals, gas-to-power projects and possibly petrochemical plants, 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.

New analysis from Frost & Sullivan, Mozambican Gas Sector: Major Opportunities Across Multiple Industries, finds that Anadarko Petroleum Corporation and Eni SpA are striving to meet all the conditions necessary to reach a final investment decision (FID) by the end of 2015 or early 2016.

“Anadarko is developing a first phase onshore 2-train LNG facility with a capacity of six million metric tonnes per annum (MMTPA), for an estimated $26 billion. Last month, the company selected a consortium comprising of Chicago Bridge & Iron Company (CB&I), Chiyoda Corporation, and Saipem SpA as EPC contractor for the initial development of the onshore LNG park,” states Frost & Sullivan Energy and Environmental Industry Analyst Celine Paton.  “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 FID in the second half of 2015.”

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 plenty investment opportunities within the O&G construction industry.

“The implementation of plans for LNG export facilities, in particular, will catalyse massive energy and infrastructure opportunities over the next 5 to 10 years,” notes Paton. “Although most of the gas produced in Mozambique is expected to be exported, 25 percent of the production will serve domestic purposes as required by the Petroleum Law revised in 2014.”

If 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. It could also help decrease expensive fuel imports with compressed natural gas being increasingly used for transportation purposes, as is already the case in Maputo. The feasibility of these ventures will depend on the appetite from end-user markets and the competitiveness of transporting gas via pipelines as opposed to  shipping.

FIDs on the LNG projects, however, are still pending. A few conditions, such as securing binding gas supply agreements, still need to be met. Additional factors, like lengthy negotiations regarding possible sale of stakes by Anadarko and Eni in Area 1 and Area 4, could further delay FID 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.

For complimentary access to more information on this research, please visit: http://ow.ly/NH78c.

Source: Frost & Sullivan

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