ExxonMobil postpones final decision on investment in gas project in Mozambique

 

The ExxonMobil group is expected to postpone approval of its natural gas project in the Rovuma basin, northern Mozambique, due to the effects of the new coronavirus and the current scenario on international markets, the Reuters news agency reported citing a variety of sources.

 

The US group announced last week it was considering “significant” cuts in capital expenditure and operating costs, in line with other groups and companies that have reduced expenses due to the abrupt drop in oil prices as well as in demand as a result of a contraction in economic activity.

 

The agency recalled that the Covid-19 pandemic has led to the postponement of several projects around the world, and Qatar, the world’s largest producer of natural gas, has postponed a large expansion plan in which ExxonMobil is one of the main partners.

 

The Rovuma LNG project, which will extract natural gas from a deepwater block on the coast of Mozambique that contains more than 85 trillion cubic feet of natural gas, was due to receive the final investment decision in the first half of 2020.

 

But the sources contacted by Reuters said ExxonMobil’s partners in this project want to postpone the final investment decision, which is not even expected to be made in the second half of the year.

 

“The pandemic is affecting investment in Mozambique, as well as Chinese and Korean financiers,” said some of the sources, who recalled this project in the Area 4 requires an estimated investment of US$30 billion.

 

The Area 4 block’s participants are Mozambique Rovuma Ventures, a partnership owned by ExxonMobil, ENI and the China National Petroleum Corporation, which together control 70% of the holding, with the remaining 30% split into equal parts between Portuguese group Galp Energia, South Korea’s Kogas and Mozambican state oil company ENH.

 

On Monday Fitch Solutions said that investments in the natural gas sector in Mozambique are “beginning to lose their shine” due to corruption and the economic slowdown, two factors which seem to contribute to an increase in the attacks by alleged militant Muslims in Cabo Delgado province.

 

On Monday a group of armed men attacked the village of Mocimboa da Praia, north of the provincial capital Pemba, and one of the locations of the fighting was a Mozambican defence and security forces barracks, which was overtaken and a flag hoisted by the attackers.

 

The statement to investors issued by Fitch Solutions said the increase in the number of attacks in Cabo Delgado province, of which 2019 is proof, endangers investments in natural gas exploration.

 

The problem, it said, is that with the fall in the price of oil and the prospect of continued low prices, the projects become less profitable, which may affect the final investment decisions that have yet to be taken.

 

Photo of an offshore oil rig | © Oil & Gas Technology

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