Insurgency Imperils Exxon/ CNPC Investment in Mozambique

 

The growing insurgency in Mozambique´s Cabo Delgado province will significantly delay the investment by the Exxon/Eni/ China National Petroleum Corporation (CNPC) joint-venture in the country´s natural gas industry, with some analysts predicting it could be stopped altogether.

Last week, Mozambique´s minister of Mineral Resources and Energy, Max Tonela, said Exxon´s final investment decision could be delayed by 2 years, but even that is now in doubt after a deadly attack by insurgents against the town of Palma, neighboring the future LNG site in Afungi.

The Area 4 joint-venture had already suspended indefinitely part of the investment in Mamba development zone.

“Exxon Mobil, the main operator and financial partner of Area 4, has been reevaluating the investment for several months, with the aim of reducing costs, in a process that was expected to take place until mid-2021 and the partners are dependent on the reevaluation”, according to Africa Monitor Intelligence information service.

According to the same source, the final decision by Exxon Mobil is not closed and needs to be analyzed by the remaining partners, which include Galp (Portugal), KOGAS (South Korea) and Empresa Nacional de Hidrocarbonetos (ENH, public).

South Korean Companies Positioning for Natural Gas Projects in Mozambique

Under construction in South Korea, the Coral Sul FLNG floating platform, operated by Eni, should be installed at the end of 2021 with production beginning in 2022.

The platform will supply 3.4 million tons (mtpa) of LNG from 2022 onwards and the Mamba zone should produce about 4.5 times the estimated for Coral Sul, that is, 15 mtpa, predictably starting in 2025, according to Africa Monitor Intelligence.

The expected production for Area 4 is higher than the 12.8 mtpa of the consortium responsible for Area 1, led by Total.

Insurgency in North of Mozambique Starts to Hit Gas Industry and Growth Forecasts

Despite the increase in general costs and the situation of insecurity in the province, dangerously approaching the security perimeter of the site, Total confirmed its intention to accelerate the development of the project to start production in 2024.

Total had suspended construction of the LNG complex in january, after a deadly attack close to the Afungi site, and had announced the resumption of the project in the same day Palma was attacked.

Total now says work “is obviously now suspended” and will only resume when government really can provide security.

Energy Transition Emperils Oil and Gas Investments in Angola and Mozambique

After the attack on Palma, analyst Joseph Hanlon now says Mozambique “lost the whole gas gamble”, which was based “on a promise of security”.

“Will Total return? Not in the short term. It will take perhaps two years for US, Portuguese and other trainers to create a functioning army. Total has other interests in Africa; it has only spent a small part of the $20 bn project cost, and can still walk away”, Hanlon wrote in his newsletter Monday.

“Even if it returns it will demand a much more favourable deal with Mozambique. ExxonMobil has already written off $20 bn of gas assets elsewhere in the world and will not go ahead in Cabo Delgado. It looks increasingly like ENI’s floating platform will be the only gas production in Mozambique”, he added.

 

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