Mozambique mega-gas project gets $20bn nod

US oil and gas group Anadarko Petroleum has given the green light to a gas project that will not only transform Mozambique’s economy but have spin-offs for SA business worth at least R7.2bn.

Having taken the final investment decision to commence with the $20bn (R290bn) Mozambique liquefied natural gas (LNG) plant means the Anadarko-led project, the largest the African continent has seen, will now break ground.

This project follows on the most significant gas find in recent history in the Rovuma basin off the country’s northern coast, where an estimated 180-trillion cubic feet of recoverable natural gas resources (or 32-billion barrels of oil equivalent) have been discovered.

“It is a fantastic day for African energy,” said Paul Eardley-Taylor, Standard Bank’s head of oil and gas for southern Africa. “This is the largest project to go ahead in Africa’s history and it will establish Mozambique as a gas supplier to the world.”

The Anadarko-led project will be the country’s first onshore LNG development, with the potential to produce 12.88-million tons of LNG a year. Already, 86% of this has been secured by key buyers in Asia and Europe through long term sales agreements.

Anadarko said there will also be a significant domestic gas component for in-country consumption, which will help drive economic development and will, over time, double the impoverished nation’s GDP.

Mozambique now awaits another imminent final investment decision from oil and gas majors Exxon Mobil and Eni for an even larger $30bn Rovuma LNG project.

Standard Bank will advance a substantial sum toward Anadarko’s Mozambique LNG, although it is yet to disclose exactly how much. It is also looking to be involved in financing the Exxon Mobil and ENI project.

Eardley-Taylor said the scale of the Mozambique LNG investments and those to follow, represents an enormous opportunity for SA business.

That is because the Export Credit Insurance Corporation of SA, a subsidiary of the department of trade and industry, is looking to underwrite Standard Bank’s investment and through a requirement attached to the facility, will secure market access for SA companies to the value of $500m to $600m.

There is potential for the Export Credit Insurance Corporation of SA to also arrange a similar facility should Standard Bank invest in the Exxon and ENI project.

Apart from the gas infrastructure, the projects will require a great deal of other infrastructure such as port, air, road, power and water facilities, housing, schooling and hospitals.

Niall Kramer, CEO of the South African Oil and Gas Alliance, said the Anadarko project is further proof SA should have moved swiftly to realise similar opportunities that would ignite the SA economy, and which it has now potentially missed.

“These are catalytic investments.” he said. “But there remains a raft of regulatory and capacity harmonisation issues in SA which need to be put in place to ensure investments of this scale are used sensibly.”

The project may soon be acquired by French oil company Total SA, which has committed to buying all of Anadarko’s African assets for $8.8bn as part of a takeover by Occidental Petroleum, which is pending.

steynl@businesslive.co.za