Oil giants granted exclusive rights for Block 5 offshore Mozambique

Talal Husseini 8 August 2018 (Last Updated August 8th, 2018 11:59)

The Government of Mozambique has approved a series of contracts giving exclusive concession rights to major oil companies to explore Block 5 for oil offshore Mozambique, after concluding four years of negotiations, disrupted by delays.

Oil giants granted exclusive rights for Block 5 offshore Mozambique
Mozambique has finalised an agreement with several major oil companies to grant concessions for oil exploration at Block 5 in Mozambique. Credit: Sasol.

The Government of Mozambique has approved a series of contracts giving exclusive concession rights to major oil companies to explore Block 5 for oil offshore Mozambique, after concluding four years of negotiations, disrupted by delays.

The contracts would give new exploration project concessions to energy companies, namely Norway’s Equinor, Italy’s Eni, ExxonMobil, Delonex Energy, and South African-based Sasol, as well as Mozambique’s national oil company ENH.

GlobalData senior oil and gas analyst Will Scargill told Offshore Technology: “Little exploration work has been carried out in Mozambique since 2015, with the focus having been on progressing the Area 1 and 4 LNG projects.

“The finalisation of the 5th round contracts after long delays is therefore an important step as the country looks to explore for further resources. It will also pave the road for the country’s 6th bid round, which the government may look to open in 2019.”

Speaking on behalf of Mozambique’s cabinet, Ana Comoana said the companies are now free to commence drilling operations to tap offshore oil reserves that, according to experts, are enough to supply energy to the UK, France, Germany, and Italy for the next 20 years.

The government aims to plug gaps in revenue after the International Monetary Fund (IMF) cancelled funding in 2015. The IMF was concerned with how $2bn in loans was spent.

Comoana said: “The contracts give the concessionaires exclusive rights to conduct oil operations with the aim to produce oil from the natural resources deposits underneath the areas.”

In 2015, the major companies were awarded the exploration rights for Block 5 oil offshore Mozambique, located in the Northern Zambezi basin, and are now free to receive concessions for drilling operations.

Equinor, formerly Statoil, quit negotiations in January of this year, while sub-Saharan oil company Delonex Energy withdrew from concessions after failing to reach a deal with the Mozambique Government.

At the time, Statoil spokesman Erik Haaland said: “Statoil has decided to disengage from negotiations on block A5-A in Mozambique…We are not part of this anymore, it is up to the other partners to make any moves regarding the stake.”

Continued investment offshore Mozambique

The government also said that more than $30bn is expected to be invested in Mozambique’s natural gas sector, in efforts to build and support a production capacity of 20 million tonnes per year of liquefied natural gas (LNG). The first LNG exports are expected to start in 2021.

Last month, Eni and ExxonMobil submitted development plants for a joint venture (JV) LNG project for Block 4 of Mozambique’s Rovuma basin.

The plan includes the proposed design and construction of two LNG trains, which will produce 7.6 million tonnes of LNG per year each.