Paul Burkhardt
MORE than half a dozen yellow tower cranes planted in the hillside above Mozambique’s capital are visible from a single vantage point at Anadarko Petroleum’s office. There are more poised along the beachfront in the other direction.
“That’s anticipation,” John Peffer, the country manager for the Texas-based oil and gas explorer, said.
Peffer was referring to the prospect of developing the largest natural gas discovery in a decade off Mozambique’s northern coast.
It is a resource that could help the economy in one of Africa’s poorest countries grow 10-fold by 2035, according a Standard Bank report.
The trouble is Andarko and Italian explorer Eni, which has found gas in a neighbouring block, can’t start development until the government completes legislation setting the terms for exports. If the law is not signed off this year, it could be delayed further by shifts in the political landscape after presidential and parliamentary elections held yesterday.
“A good decree law provides investors, financiers and liquefied natural gas (LNG) buyers with an improved risk profile,” Peffer said. This could “benefit Mozambique significantly as it competes globally for high-value markets against established suppliers”, he said.
Filipe Nyusi, the candidate for Frelimo, the party that has governed the country since 1975, was expected to win the presidency with more than 55 percent of the vote, Mark Rosenberg, a senior Africa analyst for New York-based Eurasia Group, said in a note last week.
A shift was expected in parliament, where the Mozambique Democratic Movement (MDM) would probably displace Renamo, which fought a civil war against Frelimo, as the biggest opposition party, he said.
Anadarko had three employees in Mozambique in 2007, compared with 1 800 currently, according to Peffer. That could grow to around 10 000 once construction starts on plants to chill the gas into LNG for export.
Mozambique’s revenue could reach as much as $212 billion (R2.34 trillion) over the life of the project, based on 45 trillion cubic feet from Anadarko’s Area 1, Standard Bank said in a July 31 study. That is less than half of the total estimated resource.
Area 1 and Italian explorer Eni’s Area 4 combined hold technically recoverable reserves of 120 trillion cubic feet, according to industry consultant Wood Mackenzie.
The company had conducted exploration drilling for five consecutive years, “which ends in January, and requires the decree law to provide the legal and contractual framework to progress the project towards final investment decision”, Peffer said in Maputo.
If developed to the full, Mozambique could become the third-largest exporter of LNG, behind Qatar and Australia, according to a website for the project. That could transform a country that ranks 178th out of 187 nations in the latest UN human development index.
“Government is doing more now in terms of wanting to increase the government take,” Adriano Nuvunga, the director of Maputo’s Centre for Public Integrity, said on October 3. “Companies, they’re pushing hard that all decisions are made quickly. Government is trying to be cautious.”
Last year Luca Bertelli, Eni’s executive vice-president of exploration, said it would be “very challenging” for Mozambique to meet a 2018 deadline to be able to ship the gas. Work has not started in Mozambique and building an LNG plant can take four to six years.
Still, Mozambique is likely to be among the world’s competitive LNG projects under consideration, according to Goldman Sachs analysts.
“There is a strong will to get the decree law done, because the government realises that it’s needed by the international oil companies to reach final investment decision,” Anne Fruhauf, a southern Africa analyst at New York-based risk adviser Teneo Intelligence, said.
If it was not finished by December, the decree law would be delayed by at least three months because of government priorities, including the presidential handover and the budget, she said. – Bloomberg