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Mozambique LNG FID only in Q2 2018, says Mitsui

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Japan’s Mitsui & Co – a 10% shareholder in the Area 1 gas block in Rovuma Basin – does not expect a final investment decision on the Anadarko-led liquefied natural gas project in northern Mozambique until the second quarter of 2018, at least four months than the Japanese company had planned.

“We had hoped to have finalised the negotiations with [the]Mozambican government by December,” Hirotatsu Fujiwara, Mitsui’s executive managing officer, told Reuters on the sidelines of the Gastech conference in Chiba, Japan, on Tuesday. “We are four months behind.”

However, the Mozambique government believes it has now done everything necessary to conclude negotiations for the 12 million tonnes per annum (mtpa) project. President Filipe Nyusi’s visit to Japan between the 13 and 17 March, was planned partly to deliver this message.

“This visit now by the President of the Republic [to Japan]refreshes and catalyses the [sales]process – [because we can]arrive there and say that on our side we have everything agreed, that there is commitment from the government [to this project],” Omar Mithá, head of state oil company, ENH, told journalists last month.

Anadarko and the other Area 1 partners are in talks with Japanese power and gas utilities with the intention of closing binding long-term LNG sales and purchase agreements (SPAs) within a year, Fujiwara told Reuters – adding that the consortium was ready to offer buyers various price benchmarks.

An LNG industry source told Zitamar News that Anadarko has heads of agreement with three Japanese buyers, including JERA – a joint venture between two of Japan’s biggest power utilities, Tokyo Electric Power Co. and Chubu Electric Power Co. – for a total of around 2 mtpa of LNG.

Mozambique’s energy minister, Leticia Klemens, who accompanied Nysui to Japan, may return to Tokyo later this year to help conclude the negotiations, one Japanese source told Zitamar.

The project has secured non-binding heads of agreement for more than 8 mtpa, Fujiwara told Reuters. However, it needs to secure binding SPAs for at least 9.5 mtpa to secure debt financing for the estimated $20 billion project.

The other HOAs are with buyers in Singapore, China and Indonesia. Thailand’s PTTEP, which has an 8.5% stake in Area 1, has committed to 2.6 mtpa – and has converted this into an SPA, Zitamar understands.

A spokesperson for Anadarko told Zitamar News on 15 March there is “real momentum” building behind Mozambique LNG, but would not comment on when the project is expected to reach FID.

“We submitted the POD in December 2016 and continue to make progress with the Government of Mozambique to finalize the key legal and commercial agreements to move forward with resettlement,” the spokesperson said.

The US oil independent plans to spend around $120 million in Mozambique this year, mostly on resettlement activities.

As Mozambique’s LNG mega projects continue to be delayed, the country faces growing competition from LNG suppliers elsewhere in the world.

Fujiwara told Reuters that Qatar’s decision to lift a moratorium on the development of the North Field – the world’s largest gas field – was a surprise, but was unlikely to have a significant impact on the Mozambique project because it had already taken into account a substantial growth in demand beyond 2025.

Qatar’s state oil company, Qatar Petroleum, was one of the company’s rumoured to be interested in buying Anadarko’s stake in Area 1. QP has had a successful partnership building LNG projects in Qatar with US supermajor ExxonMobil, which announced a $2.8 billion deal last month to buy half of Eni’s stake in the neighbouring Area 4 gas block.

© 2017, Zitamar Ltd. Reproduction and dissemination prohibited without written permission.

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