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Mozambique LNG: The Single Largest FDI Project in Africa

Mozambique LNG project comprises the Golfinho-Atum gas field development in the offshore Area 1 Block of the deep-water Rovuma Basin and the construction of a 12.88 million tonnes per annum (Mtpa) onshore liquefied natural gas (LNG) facility on the Cabo Delgado coast of Mozambique.

The project is being developed following the discovery of a large natural gas quantity off the coast of northern Mozambique in 2010. Spanning 2.6 million acres, the offshore Area 1 has estimated reserves of more than 75Tcf (trillion cubic feet) of recoverable natural gas resources and which contains six gas fields, namely Windjammer, Barquentine, Lagosta, Camarão, Golfinho and Atum, which are located in water depths of approximately 5,000ft. The LNG processing and export facility will be developed in the Afungi peninsula in Cabo Delgado, the northernmost province of Mozambique.

The environmental impact assessment (EIA) for the Area 1 Mozambique LNG project was carried out between 2011 and 2014. The Mozambican Ministry of Coordination of Environmental Affairs (MICOA) approved the EIA report on June 2014, while the concessions to design, build and operate the marine facilities for the project were secured from the Government of Mozambique in July 2017.

The Mozambique LNG project is the first onshore LNG facility in Mozambique. The other major LNG projects sanctioned for development in the country are the Rovuma LNG project and the Coral South FLNG project, both of which form part of the Area 4 development of the Rovuma Basin, offshore Mozambique.

In June 2018, Mozambique LNG partners made the final investment decision on the $20bn scheme which includes the liquefaction plant, offshore wells and infrastructure, financing and contingencies.
Mozambique’s FID for the $20 billion (132% of Mozambique’s GDP) LNG project was made in June and building works started in August 2019.

French oil and gas company Total holds a majority stake in the Mozambique Rovuma Offshore Area 1 development consortium and is the operator of the project. Total acquired the 12.9mn t/yr LNG project, along with a 26.5pc operating stake in offshore block 1 in 2019 when it purchased US independent Anadarko’s African portfolio from peer Occidental. The company completed its $3. 9bn purchase of assets that gave it control over the project in September 2019.

In November 2019, the African Development Bank (AfDB) approved a $400m loan to support the construction of the integrated LNG plant and a liquefaction facility in Mozambique.

On 17 July 2020, Total secured a USD14.9 billion financing (98% of Mozambique’s 2020 GDP). According to Total, the financing involves direct and covered loans from eight Export Credit Agencies (ECAs), 19 commercial bank facilities and  African Development Bank (USD400 million).

Expert says, acquiring funding for construction of the project, will chill natural gas into a liquid for export comes as oil and gas companies globally are focused on cutting costs as the coronavirus curbs energy demand and pressures prices.

The project involves the construction of two gas liquefaction trains, the first of which is scheduled to come on stream in 2024. The two trains, 13MillionTonne Per Annum (13MMTPA) MLNG, is one of the two large sale LNG projects under development in Africa’s southeastern most edge.

Similarly, the Cairo-based African Export-Import Bank (Afreximbank) is also supporting the advancement of Mozambique’s energy industry and economy by committing up to $400 million in guarantees and direct lending to the Area 1 LNG project in August 2020.

Fitch Rating noted in a report that the Mozambique LNG shows continued progress on project implementation despite security challenges and lower medium-term hydrocarbon prices, raising the prospect of significant positive effects on Mozambique’s growth and public finances in the long run.

The project is estimated to generate approximately 15,000 direct jobs and 685,000 indirect jobs. Mozambique LNG will generate about $50 billion in revenue for Mozambique’s government over 25 years, according to Total. That will be supplemented by sales from an even bigger project led by Exxon Mobil Corp. and planned in the neighboring Area 4 offshore block. The Mozambique LNG is expected to propel Mozambique to become the third biggest natural gas exporter after Qatar and Australia.

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