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Mozambique LNG: $20, 23 or 25 billion?

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Differing estimates for the total cost of Anadarko’s Mozambique LNG project are causing a stir in Mozambique — but are due to differing possible financing structures for the project, which will only be set in stone when the project reaches financial close.

A greater debt portion increases the partners’ internal rate of return on the project, but simultaneously increases the project costs, as interest payments are included in the total.

The Mozambican Ministry of Natural Resources and Energy, MIREME, announced ahead of the Final Investment Decision on Tuesday that the total was $25 billion — of which $11 billion would be the partners’ equity, and $14 billion would come from lenders, giving a debt:equity ratio of 56:44.

President Nyusi said on the FID ceremony that the project’s cost is $23 billion – a figure which a MIREME spokesperson confirmed for Zitamar News on Thursday. Anadarko puts the final cost at $20 billion.

Anadarko’s $ 20 billion figure covers the amount expected to be spent over the coming five years for the construction of the plant and offshore wells — but does not include historical exploration costs. These should be included when assessing the total cost of the project for Mozambique, especially as Anadarko and the other Area 4 partners will be including them when they seek to claw back this money against taxes due to Mozambique.

Whether the final project figure comes to $23 or $25 billion, depends on how much the project partners ultimately end up borrowing, which is expected to be around $14 billion — higher than previous estimates, due in part to the return of the US EXIM bank to the project after domestic political issues were resolved, allowing it to start lending again.

The Anadarko presentation in February said it expected debt to make up between 55% and 65% of the total investment.

© 2019, ZITAMAR NEWS. All rights reserved.

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