Gas Processing & LNG is Produced by Gulf Publishing Holdings LLC

Mozambique and Tanzania’s drive to monetize natural gas resources

Mozambique and Tanzania hold an estimated 180 Tft3 and 57 Tft3 of proven natural gas reserves, respectively. Although the countries are two of Africa’s biggest holders of proven natural gas reserves, they are grappling with uncertainties surrounding hydrocarbon industry regulations and a prolonged cycle of low oil and gas prices. These circumstances have forced Mozambique and Tanzania to postpone key natural gas monetization projects.

Mozambique instated its New Petroleum Law in 2015 to replace regulations established in 2004 and updated in 2008; however, many specifics of the law are still unclear. In a similar scenario, Tanzania’s recently approved oil and gas laws provide no clear roadmap on production, commercial processing, liquefaction, transportation, storage or distribution of its natural gas resources.

Tanzania’s regulations also pose a threat to new investment, as the government insists that the laws be applied retroactively. This would give the government the power to renegotiate already-signed contracts, and even to throw out those contracts not favoring national interests.

LNG plans face challenges. The implementation of the new laws comes at a time when international oil and gas companies operating in the two countries are at different stages of developing two separate gas liquefaction export projects worth a collective $37 B. 

A late-2016 report on Tanzania’s hydrocarbon sector by industry research firm Business Monitor International stated, “Several key fiscal and regulatory uncertainties remain, including those relating to taxation, domestic supply obligations and local content requirements … Further clarification will be needed before a final investment decision can be taken [on an LNG project].”

A consortium of ExxonMobil, Statoil, Ophir, Shell and Tanzania Petroleum Development Corp. has agreed to develop a 10-metric-MMtpy onshore LNG export facility valued at $30 B. The facility would be built near the coastal city of Lindi in southeastern Tanzania. The consortium signed a draft agreement on the development of the project in early 2017, although the estimated completion and startup dates have been moved several times.

Under the initial proposal, the project was to be commenced in 1Q 2017 and completed in 2024, but it is unlikely that this deadline will be met. Analysts believe it will take at least 5 yr for the project to reach a final investment decision, and another 5 yr to build the multibillion-dollar LNG terminal.

Gas gains in the power sector. Tanzania is scaling up consumption of domestic natural gas by expanding its gas-fired electricity generation capacity. The country plans to develop 2,000 MW of new, gas-fired power plants by 2018.

However, compared to its neighbor, Mozambique, development of Tanzania’s natural gas resources is still in its nascent phase, despite the modest progress achieved in the sector. Mozambique holds an estimated 180 Tft3 of recoverable natural gas resources, mostly in the northern Rovuma basin.

Since 2015, Mozambique has provided a clearer regulatory framework for its natural gas development program, with the introduction of new petroleum laws that apply to new concessions, new investors and international oil companies keen to expand their operations in the country.

Project development plans submitted by international oil companies for government approval must have a clause that commits to the allocation of 25% of the oil or gas produced for domestic consumption. Unlike in Tanzania, Mozambique’s new petroleum laws do not apply to previous contracts or concessions. As an example, this is why South African petrochemical giant Sasol—the sole natural gas producer in Mozambique at present, with production capacity of 135 Bft3 of natural gas at the Pande and Temane onshore fields—can allocate only 18 Bft3 (approximately 13%) of its total yield for domestic consumption. Sasol exports the rest to South Africa through an 862-km pipeline.

In addition, Mozambique’s government has explained the procedures for the sale of associated and nonassociated gas, and what will happen if a concession holder decides not to carry out the sale. The law also creates a decommissioning fund, and explains how interest in a concession can be transferred and how a concession is managed.

Upstream endeavors. Two international exploration and production (E&P) companies—Italy’s Eni SpA and Texas-based Anadarko Petroleum Corp.—have announced major discoveries in offshore Blocks 1 and 4. After oil and gas prices stabilize, it is expected that more international oil and gas companies will be encouraged to seek E&P opportunities in Mozambique, especially with the more oil and gas investment-friendly regulations.

Even with the old petroleum laws, a conducive environment has existed for mergers and acquisitions in Mozambique’s upstream sector. For example, the laws accommodated the entry of leading Asian national oil companies, such as Petronas of Malaysia, Mitsui of Japan, CNPC of China, ONGC Videsh of India and PTTEP of Thailand. Other partners in Mozambique’s Rovuma basin concession areas include Bharat Petroleum Resources Ventures, Tullow, Wentworth Resources and Maurel & Prom.

Regional Foucus Fig 01
Fig. 1. Location of the Anadarko-led consortium’s proposed Mozambique LNG terminal. Source: Mozambique LNG.

Anadarko, the operator of offshore Block 1 (26.5% working interest) has made modest progress. It announced in July 2017 that it had signed an agreement with Mozambique’s government for the design, building and operation of marine facilities for its proposed, two-train LNG project (Fig. 1).

The US oil and gas E&P company, which has partnered in Block 1 with Empresa Nacional de Hidrocarbonetos EP, Mitsui E&P Mozambique Area 1 Ltd., ONGC Videsh Ltd., Bharat PetroResources Ltd., PTT Exploration & Production Plc. and Oil India Ltd., is developing the first onshore LNG plant with a capacity of 12 metric MMtpy.

FLNG in Mozambique. Italy’s Eni, the operator of Area 4, has made substantial progress in the commercialization of Mozambique’s natural gas resources.

In September 2017, Eni picked RINA Services as the preferred certification authority for the design and fabrication of subsea structures and equipment for its $7-B Coral South FLNG unit, which is part of Eni’s Coral South Development Project. RINA will also provide technological validation services for the project. The 3.4-metric-MMtpy FLNG unit, the first in Africa and the third globally, will be installed in the south part of Area 4 offshore Mozambique, in the deep waters of the Rovuma basin.

In June 2017, Eni said that the FLNG project will be financed through a project finance structure that will cover approximately 60% ($4.7 B) of its cost, making it the first FLNG unit to be financed in this way. At least 15 major international banks and five export credit agencies have subscribed to the financing agreement. GP


Shem Oirere

Shem Oirere is a freelance journalist based in Nairobi, Kenya. He has spent more than 10 yr covering various sectors of Africa’s economy, and has had numerous articles published in several international publications and websites. Previously, Mr. Oirere worked for Kenyan national newspapers, including the Daily Nation, Kenya Times and People Daily, where he served in various capacities as correspondent, business reporter and sub-editor. He earned a higher degree in journalism from the London School of Journalism, and is also a member of the Association of Business Executives (ABE).



Copyright © 2018. All market data is provided by Barchart Solutions. Futures: at least a 10 minute delay. Information is provided 'as is' and solely for informational purposes, not for trading purposes or advice. To see all exchange delays and terms of use, please see disclaimer.

                                  CMEGroup                                     Icelogo


Editorial Comment
-Adrienne Blume
As discussed in the HPI Market Data 2019 report, published in November by Gas Processing & LNG’s sister publication, Hydrocarbon Processing, rising propane and ethane supplies in the US have been enabled by greater production of shale gas.
Industry Trends: Norway targets global LNG market
-Eugene Gerden
Norway aims to become a leading player in the global LNG market during the next several years through the establishment of new, large-scale LNG terminals.
Regional Focus: Challenges of scaling up Africa’s LNG production
-Shem Oirere
Several gas projects are underway in Africa, but they continue to be constrained by inadequate infrastructure, slow finance mobilization, lack of security and uncertainty over hydrocarbon regulations that are casting doubt on the outcome of the continent’s drive to meet its anticipated 128% gas demand increase by 2040.

GasPro 2.0: A Webcast Symposium

Register Now

The global LNG industry is becoming increasingly interconnected as grassroots export projects get off the ground. Another technology route for processing gas into fuels—GTL—is attracting renewed attention due to improving economics. Small-scale solutions for both LNG and GTL are at the forefront of new technological developments, while major projects using more conventional technologies continue to start up around the world.

During this webcast, we will focus on LNG, GTL, gas processing technology developments and deployments, operations, small-scale solutions, transportation, trading, distribution, safety, regulatory affairs, business analysis and more.

October 25, 2018 08:30 AM CDT

Register Now


Please read our Term and Conditions, Cookies Policy, and Privacy Policy before using the site. All material subject to strictly enforced copyright laws.
© 2018 Gulf Publishing Holdings LLC.