Huge discoveries of offshore gas in Mozambique, and promising finds in Tanzania, have turned East Africa into a new prospection frontier.
Two companies, Anadarko of the US and ENI of Italy, have announced gas finds of over 50 trillion cubic feet (tcf) combined off Mozambique. Abutting the Tanzanian border, both Area 1 (Anadarko) and Area 4 (ENI) form part of the promising geology of the Rovuma Basin. And there may well be more to come.
Anadarko hopes to get a final investment decision by year-end 2013, “and in order to achieve that milestone, we need to get reserves certified and market sales agreements agreed in principle”, said Donald MacLiver, Anadarko’s vice president for operations. The company is appraising the offshore Windjammer, Barquentine and Lagosta fields, which are currently thought to contain 15-30 tcf of recoverable gas. This should support an onshore liquefaction facility of at least two Liquid Natural Gas (LNG) trains of 5m tn/year, with the first gas expected around 2018.
The Italians are keen to help the Mozambican economy, especially in power generation. Paolo Scaroni, ENI’s CEO, told the recent World Petroleum Congress in Doha that $50bn would be invested in Mozambique: “Part of the gas from our super-giant Mamba field in offshore northern Mozambique will be used to develop the local and regional community.”
The company has a track record in setting up gas-fired power plants in Africa, and says this was useful in the bidding rounds for the block. More bullish on its lead times, ENI believes first liquefaction could happen in 2016.
Anadarko, however, is focused on the export market. Without ruling out any longer-term development, MacLiver believes “The first two trains should really be seen as LNG for export – it’s very dry gas, so the premium market is the best way to use this resource. It’s very far north, so we are far away from any infrastructure.”
Anadarko has an operating interest of 36.5 percent in Area 1, and its Asian co-investors – a Japanese company, Mitsui, and two Indian companies, Bharat Petroleum and Videocon Industries – should help lock in marketing agreements, especially in South Korea and Japan. ENI, with 22.5 tcf in reserves after successful strikes at Mamba South-1 and Mamba North-1, says it will build a three-train LNG facility, also turned towards eastern markets.
The other member of the Area 1 consortium, Cove Energy with 8.5 percent, provides a gauge of just how exciting Mozambique’s energy prospects appear to the markets: the London AIM-listed Cove has sparked a bidding war by announcing the whole company is up for sale, and large premiums are already being priced into the shares. Oil India, Thailand’s national oil company PTTEP, and the UK’s BP are in the running.
The explosion in shale-gas development internationally does not appear to have put off operators, despite the vast shale reserves in the US coming on stream from 2020 onwards. “It’s clearly competition, but we are confident in the market. There is adequate market for our two trains,” says MacLiver. Anadarko is also placing faith in the relative ease of the project. “What we have seen from our pre-feed work on developing a two-train facility is that the cost of development is going to be significantly cheaper than in Australia – we are pleased with the numbers coming in.”
South Africa’s Sasol, finally completing the $300m expansion of its upstream gas production facility in Mozambique from the Temane/Pande fields, is now turning to fresh projects in Mozambique. In February 2012 the company will begin seismic surveys on land around the tourist-friendly Inhambane province. It is also looking for partners for its Sofala offshore interests.
Beyond Mozambique, the East African region is now attracting significant interest. Morgan Stanley is predicting the drilling of 23 wells in 2012 in Kenya, Tanzania and Mozambique – double the activity of 2011. Orca Petroleum, through its subsidiary PanAfrican Energy, has been developing its Songa Songa deposit for several years. Ophir Energy, which, with partner BG Group, owns the operating interest in offshore blocks 1, 3 and 4, had a fruitful year, drilling three successful wells. It has found around 4 tcf of gas so far.
The activity is not just from the smaller independent companies, but majors too. Shell has a partnership with Petrobras to survey the Tanzanian coast. BP is reported to be looking at buying Ophir outright. Norway’s Statoil is drilling an exploratory well with ExxonMobil.
At the forefront of the minds of both Tanzania and Mozambique’s citizens is how to reap the benefits of this flurry of investment. Mozambique’s minister of mines, Esperença Bias, told reporters that the government’s programme “focuses on greater utilisation of natural gas”, especially in power generation and petrochemicals. The growth of large agricultural projects like the Beira corridor would benefit from gas used as feedstock for fertiliser.
For his part, Tanzanian minister of finance Mustafa Mkulo told IMF chief Christine Lagarde in a letter, “Discussions on how to position the country to best take advantage of the huge natural gas potential have been initiated”, and that he had proposed a “future generations fund to save a portion of the resource wealth”. Galvanised by complaints over gold-mining companies that had won overly favourable tax concessions, the Tanzanian parliament is likely to scrutinise future energy-sector deals more carefully. The government has taken a loan from China’s Exim Bank to develop a pipeline for power generation from the gas province of Mtwara to Dar es Salaam.