Europe Expects Early November Mozambique’s LNG Exports

By Kestér Kenn Klomegâh

Local and foreign media are awash with Mozambique’s efforts in supplying the first tanker of liquefied natural gas (LNG) to be exported from the Rovuma basin, off Cabo Delgado province, to Europe.

While this southern African country is set to make its history with the new direction in exports, it will also help, to some extent, alleviate the energy crisis that has arisen due to the Russia-Ukraine crisis.

 Mozambique expects to ship these liquefied natural gas exports to Europe from the Eni-operated Coral Sul floating plant. The BP’s LNG tanker, British Sponsor, has already arrived offshore northern Mozambique, according to the Welligence Energy Analytics media release, with all of Coral Sul’s annual gas output of 3.4 million tonnes contracted to BP for 20 years on a free-on-board basis.

“Regarding the LNG export, it will be for European markets since BP is committed to taking the gas resources to Europe,” said the National Petroleum Institute (INP) in an emailed response to Reuters. The new LNG cargoes will help alleviate a tight global LNG market and gas shortages in Europe as winter looms following Moscow’s February invasion of Ukraine and Russia’s later decision to curb gas pipeline supplies into major European Union economies.

As part of its exploration activity offshore Mozambique, Eni discovered the Coral South gas field in 2012 and took its final investment decision in 2017, pledging to start producing gas using a floating LNG plant after five years.

Thanks to a fast-track strategy led by CEO Claudio Descalzi, Eni has been able to stick to its original schedule despite the pandemic and supply chain issues. The exports from Mozambique, which neighbours South Africa, will help transform its economy as billions of dollars pour into the country to develop massive offshore gas fields in its deepwater Rovuma basin.

Mozambique’s Minister in charge of Economy and Finance, Max Tonela earlier informed while in Washington, on the sidelines of the annual meetings of the International Monetary Fund, that the first tanker of liquefied natural gas (LNG) to be exported from the Rovuma basin, off Cabo Delgado province.

Of the three liquefied natural gas projects approved for the northern region of Mozambique, it is the Coral Sul platform, on the high seas, far from the armed violence in Cabo Delgado, that is set to be the first to export gas from reserves that are among the largest in the world.

The platform, which is overseen by a consortium led by Italy’s Eni, is expected to produce 3.4 million tons of gas per year. The gas has already started to be processed on the platform, and the arrival of the first cargo ship from BP, which has signed a contract to buy the production for 20 years.

The other two larger projects, led by TotalEnergies and Exxon/Eni, have liquefaction plants planned for onshore on the Afungi peninsula but await final decisions by the oil companies to go ahead. The TotalEnergies project was underway but was suspended in March 2021 due to armed attacks in the Cabo Delgado region.

“We have prioritised ensuring the resumption of the construction work of the two onshore liquefaction lines, promoted by Area 1, and all the work that has been carried out aims to recover the situation of normality for families, for the affected populations, but also to promote investments that will result in a more sustained development of the region,” Minister Max Tonela said.

According to him, among the projects is the resumption of TotalEnergies, but taking into account the volume of gas resources that exist and the challenges at the global level of demand and diversification of sources, the government is ready to discuss other scenarios that do not jeopardise the development of onshore projects.

In early September, Mozambique’s president, Filipe Nyusi, also said that the new global scenario might be an added reason to rethink the issue. “We made the first platform: what is the possibility of making another one? There are studies in that direction among the measures to accelerate the production of those reserves,” Nyusi said.

The Rovuma gas is expected to represent 0.3% of the total revenue of the Mozambican state in 2023, which will be the first full year of production from the Coral Sul floating liquefied natural gas platform (FLNG), according to the State Budget draft for 2023.

“Of the amount foreseen for State revenue, 1.25 billion meticais (€20 million) comes from natural gas from Area 4 of the Rovuma Basin. The number comes from the medium-term fiscal scenario,” reads part of the document sent for discussions in parliament and published on the Ministry of Economy and Finance website.

Rovuma gas, off Cabo Delgado, a province affected by an armed insurgency and a humanitarian crisis, accounts for just 0.3% of total revenue collection, which is expected to reach 357 billion meticais (€5.7 thousand million) in 2023.

The general gas revenues are expected to grow as exploitation of the reserves progresses. The project, led by Italian oil company Eni will produce 3.4 million tonnes of liquefied natural gas per year for BP (which has bought the production for 20 years). Revenues from the extractive sector, including gas, should help to create a sovereign wealth fund this year, to which 40% of them will be channelled, according to the proposed sovereign fund law.

In forecasts made in 2020, with all three LNG projects up and running, Mozambique is expected to receive $96 billion (roughly the same amount in euros) over the lifetime of Rovuma gas reserves – almost five times the country’s annual gross domestic product (GDP).

With an approximate population of 30 million, Mozambique is endowed with rich natural resources but remains one of the world’s poorest and most underdeveloped countries. It is one of the 16 countries with a collective responsibility to promote socio-economic, political and security cooperation within the Southern African Development Community.