Worries at OVL over Mozambique LNG for India

Vol 17, PW 26 (14 Aug 14) People & Policy

Mumbai-based Videocon Petroleum made a shrewd move by selling its 10% stake in Mozambique’s offshore Rovuma Area 1 block to OVL and Oil India last year for a cool $2.48bn.

Because today trouble is brewing at the Anadarko-operated block where the Mozambique government has failed to provide the necessary legal framework to ensure gas production can be converted to LNG and exported. OVL believes this will delay first gas production from 2018 to 2020 and wants an urgent appointment with the impoverished African nation’s minister of mineral resources Esperanca Bias.

An Indian delegation led by oil ministry joint secretary PK Singh is expected in Mozambique this month (August) to safeguard the interests of OVL, Oil India and Bharat Petro Resources (BPRL) who hold a combined 30%. Mozambique officials were positive earlier, but two weeks ago they went cold and stalled discussions, we hear.

OVL worries that if it doesn’t manage to convince Mozambique to allow a LNG terminal to be integrated with gasfield development then production could get indefinitely delayed. General elections in Mozambique, scheduled for October (2014), aren’t helping matters.

“Huge investments are needed to set up an LNG terminal,” adds an Indian government source. “It requires debt financing and long-term LNG offtake and ship hire contracts.

This is impossible without a stable legal and fiscal regime.”