Mozambique is expected to become one of the world’s top 10 largest LNG producers by the mid-2020s, when over 30 million tonnes per annum (mtpa) of LNG comes on stream, at par with capacity in African leaders Nigeria and Algeria.
The feed gas for new LNG projects will come from the ultra-deepwater Rovuma Basin, where over 125 trillion cubic feet (tcf) of recoverable natural gas resources have been discovered to date. This consists of 75 tcf in block Area 1 and 50 tcf in block Area 4.
Current oil and gas production in Mozambique stands at approximately 90,000 barrels of oil equivalent per day (boed) of natural gas and condensate, from Pande-Temane Complex, an onshore gas development and the only producing field in the country.
The next project to come online is the Coral South floating liquefied natural gas (FLNG) project in Area 4, operated by Italy’s Eni S.p.A (Eni), which achieved a final investment decision in 2017.
Global pre-final investment decision LNG projects
Source: GlobalData Oil & Gas
The development break-even gas price of around US$4-5 per mcf for the onshore LNG projects in Mozambique is competitive compared to current Japan spot LNG prices of $9.24 per mcf. This is due to the relatively low expected capital expenditure per mtpa in comparison to other integrated LNG projects around the world, and the low upstream cost compared to non-integrated LNG projects in the Americas.
There are positive signs reflecting the progression in LNG projects. Securing additional gas sales and purchase agreements (GSPAs) has formed the majority of the activity from Mozambique and Rovuma LNG participants so far in 2019. These contracts are a key part of progressing the projects towards the construction phase, as they provide certainty about future revenues to underpin the massive capital expenditure of nearly $40 billion required to bring these facilities online.
Mozambique LNG developments are some of the most important investments for all participants in Areas 1 and 4. By 2025, ExxonMobil will spend approximately $6.4 billion, while Eni, another biggest player, is committed to spending approximately one-third of its global capital expenditure.
The advancement of LNG business in Mozambique will transform the country into a major global LNG supplier. It will also bring direct revenue to the Mozambique government and promote the growth of local industries through a domestic gas component of the initial project and follow-on expansions.