LNG-hungry India boosts gas stake in Mozambique

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India’s oil and gas companies are increasingly turning to Mozambique as a future source of LNG supply, following a string of large natural gas discoveries since 2010 that have boosted the nation’s gas reserves to more than 170 Tcf.

Late last month ONGC Videsh Limited (OVL) – a wholly owned subsidiary of Oil and Natural Gas Corporation (ONGC), India’s national oil and gas company – said it had agreed to pay $2,640 million for a direct 10% interest in the Rovuma Area 1 Offshore Block. The transaction, expected to close around the end of 2013, remains subject to the approvals of the governments of Mozambique and India, regulatory approvals, and pre-emption rights.

The agreement with Anadarko Moçambique Area 1 follows OVL’s announcement in June of a joint acquisition, with Oil India Limited (OIL), of an indirect 10% interest in Area 1 from Videocon Mauritius Energy, a subsidiary of India’s Videocon Group. BPRL Ventures Mozambique, another Indian public sector undertaking (PSU), already holds a 10% interest in Area 1.

Prolific Rovuma Basin: OVL believes that Area 1, which covers 2.6 million acres in the prolific deep-water Rovuma Basin offshore northern Mozambique, has the potential to become one of the world’s largest LNG-producing hubs and is “strategically located to supply LNG to India at a competitive price”. The largest gas discovery to date offshore eastern Africa, the block contains the Prosperidade and Golfinho/Atum natural gas complexes which together contain estimated recoverable resources of 35-65 Tcf.

Map of natural gas field discoveries in Mozambique_

OFFSHORE AREA 1 – Exploration activities in Offshore Area 1 have resulted in six of the world’s largest discoveries since 2010 – at the Windjammer, Barquentine, Lagosta, Camarão, Golfinho and Atum prospects.

In co-operation with the government of Mozambique, Anadarko, its partners, and Eni (as the operator of the adjacent Area 4 block) are developing an “LNG park” with first LNG cargoes expected in 2018. The partners in Area 1 include Anadarko, as operator of the project, Mozambique’s national oil and gas company Empresa Nacional de Hidrocarbonetos (ENH), Japan’s Mitsui, BPRL, Videocon and Thailand’s PTTEP.

50 mtpa target: Over time, the project partners envisage the production capacity of the LNG park rising to 50 mtpa, which would make Mozambique one of the world’s largest producers.

Anadarko conducting a natural gas flow test offshore MozambiqueAnadarko conducting a natural gas flow test offshore Mozambique.

“We are very pleased to have agreed with Anadarko the terms to acquire a direct 10% Interest in Area 1 to add to the 10% interest OVL has agreed to jointly acquire with OIL recently,” said OVL chairman Sudhir Vasudeva. “As a result of both transactions, OVL will own a significant interest in this strategic project in Mozambique.

“Area 1 has potential to become one of the world’s largest LNG projects and today’s acquisition marks a further significant step by the OVL/ONGC group towards the energy security of our country.”

The company added that the acquisition of an interest in Area 1 – which would increase OVL’s reserve and resource base significantly – was “consistent with OVL’s quest of adding high-quality international assets to its existing E&P portfolio”. The project would also be an important milestone in reaching OVL’s long-term production targets of 20 million tonnes of oil equivalent (Mtoe) by 2018 and 60 Mtoe by 2030.

Anadarko, for its part, intends to use the proceeds of the sale to extend its oil interests in North America. Anadarko’s president and CEO, Al Walker, said: “We expect to use the net proceeds from this transaction to further accelerate the short- and intermediate-term oil and liquids opportunities we have in the Wattenberg field, Eagleford Shale, Permian and Powder River basins, as well as the Gulf of Mexico and other evolving plays in our portfolio.”

Oil-linked LNG sales: Earlier this year, Walker said: “In Mozambique, the company continues to advance the massive natural gas resources discovered in the Offshore Area 1 toward first LNG cargoes in 2018. Anadarko and its co-venturers expect to achieve reserve certification in 2013, while continuing to make progress securing oil-linked LNG sales agreements.”

(Photos and map courtesy of Anadarko.)

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For more on Mozambiaque visit Gas Asia Summit:

ENI will be speaking on  "New Frontiers for Gas Supply to Asia: East Africa Case Study: Looking at the Potential for Exports from Mozambique"