Anadarko Petroleum approved a
$25-billion liquefied natural gas (LNG) project in Mozambique that could help
transform the economy of one of the world’s poorest countries.
CEO Al Walker signed off on what he
called the biggest ever foreign investment in Africa.
Anadarko sees potential for
Mozambique to become one of the largest LNG suppliers in the world, and the
project – expected to export the fuel to countries in Asia and Europe – will
play a big part. It will be funded with $11-billion of equity and $14-billion
of debt.
“Over time this project will
double this country’s GDP,” Walker said at the signing ceremony in Maputo with
Mozambique President Filipe Nyusi.
It’s taken the American
company almost a decade to green-light the development after discovering gas in
Mozambican waters in 2010. The country had to draft new regulations for its
nascent oil and gas industry, even as uncertain global demand for LNG slowed
plans. The government expects $95-billion of revenue over 25 years from this
project and others led by Exxon Mobil and Eni.
“It is the start of a new era
for Mozambique,” said Darias
Jonker, a London-based director at consultants Eurasia Group. The size
of these projects “will bring tens of billions of dollars of investment” and
revenue to the government, he said.
Developing the hydrocarbon
resources is crucial for the southern African nation, which has struggled to
service its debt in the past. Nyusi could use Anadarko’s planned investment in
the project, called Mozambique LNG, to showcase his achievements ahead of
elections in October, and hope to compensate for problems with borrowings,
according to Jonker.
Mozambique LNG is at the centre
of a new restructuring deal the government reached with a core group of
Eurobond holders last month. While investors will no longer have access to
future revenue from the project, the in-principle agreement allows the
administration to pay a lower interest rate until after the country’s gas
production begins in 2023.
“Both Mozambique’s long-term
economic outlook and its ability to re-establish credibility with lenders
depend entirely on future gas revenues,” said Anne Fruhauf, vice president at
New York-based risk adviser Teneo.
Occidental Petroleum agreed
to buy Anadarko earlier this year. Once that deal is completed, Total has an
arrangement with Occidental to acquire all of Anadarko’s African assets for
$8.8-billion, including Mozambique LNG.
The project will have the
capacity to produce 12.9-million tons a year in the first phase, with scope to
expand to as much as 50-million tons. It has contracts with key global
importers in Asia and Europe, and Mozambique’s location between the Pacific and
Atlantic basins is an advantage that will help the country compete with a
booming number of LNG suppliers.
Flexible commercial
arrangements, including an innovative co-purchase agreement with Tokyo Gas and
Centrica, have helped the project secure “high-quality customers in a crowded
LNG market,” Frank Harris,
head of LNG consulting at Wood Mackenzie, said in a note.
Gas from the
Anadarko-operated offshore field will be sent to a processing plant on land,
where it will be liquefied and then exported.
Anadarko has implemented a
resettlement program in the area, and is building roads and an airport. The
company has said it will continue to develop the infrastructure until Total
takes over.
Exxon’s Rovuma LNG venture is planning a 15.2-million-ton-a-year facility adjacent to Anadarko’s and expects to reach a final investment decision by the end of the year. Eni approved a $7-billion project in 2017.
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