Forget Mozambique LNG unless you can pay well

Vol 15, PW 6 (22 Sep 11) Midstream & Downstream

Indian customers will have to pay global market prices if they want to receive LNG from Anadarko Petroleum’s Mozambique deepwater block Offshore Area 1, where Bharat Petroleum and Videocon Petroleum each hold 10%.

PETROWATCH learns the consortium is reluctant to commit long-term LNG to India from the Rovuma basin gas discovery in Mozambique unless Indian companies are prepared to pay prevailing global rates. Texas-based Anadarko and partners are under the impression this isn’t so and have no plans to supply LNG to India from the first 5m t/y train planned in this former Portuguese colony.

On September 21 and 22, consortium partners met in Houston to discuss operating and marketing issues related to Offshore Area-1, and their proposed $4bn liquefaction facility to export gas. KBR, formerly Kellogg Brown & Root, is expected to submit a Front End Engineering and Design (FEED) report for the liquefaction facility by December this year and consortium partners will soon commission another, parallel, FEED report so they can compare both before proceeding.

“We need 10,000 acres of land for the terminal,” says a consortium source. “Six locations have been offered by the Mozambique government.

From these we’ll narrow it down to two.” This year the consortium plans to spend $210m on pre-project activities including land acquisition and hiring LNG marketing teams.

By 2013, partners will take a Final Investment Decision (FID) on the LNG project and first LNG is expected from 2018, before which long-term contracts must be finalised. As expected, the consortium’s priority market for first Rovuma LNG will be China, Taiwan, South Korea or Japan, where customers are happy to pay global rates.

“Our focus for the first train at least,” adds a source, “is to maximise revenue.”