• 3 hours Russia, Saudis Team Up To Boost Fracking Tech
  • 9 hours Conflicting News Spurs Doubt On Aramco IPO
  • 10 hours Exxon Starts Production At New Refinery In Texas
  • 11 hours Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 1 day Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 1 day Oil Gains Spur Growth In Canada’s Oil Cities
  • 1 day China To Take 5% Of Rosneft’s Output In New Deal
  • 1 day UAE Oil Giant Seeks Partnership For Possible IPO
  • 1 day Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 1 day VW Fails To Secure Critical Commodity For EVs
  • 1 day Enbridge Pipeline Expansion Finally Approved
  • 1 day Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 1 day OPEC Oil Deal Compliance Falls To 86%
  • 2 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 2 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 2 days Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 2 days EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 2 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 2 days Aramco Says No Plans To Shelve IPO
  • 5 days Trump Passes Iran Nuclear Deal Back to Congress
  • 5 days Texas Shutters More Coal-Fired Plants
  • 5 days Oil Trading Firm Expects Unprecedented U.S. Crude Exports
  • 5 days UK’s FCA Met With Aramco Prior To Proposing Listing Rule Change
  • 5 days Chevron Quits Australian Deepwater Oil Exploration
  • 6 days Europe Braces For End Of Iran Nuclear Deal
  • 6 days Renewable Energy Startup Powering Native American Protest Camp
  • 6 days Husky Energy Set To Restart Pipeline
  • 6 days Russia, Morocco Sign String Of Energy And Military Deals
  • 6 days Norway Looks To Cut Some Of Its Generous Tax Breaks For EVs
  • 6 days China Set To Continue Crude Oil Buying Spree, IEA Says
  • 6 days India Needs Help To Boost Oil Production
  • 6 days Shell Buys One Of Europe’s Largest EV Charging Networks
  • 6 days Oil Throwback: BP Is Bringing Back The Amoco Brand
  • 6 days Libyan Oil Output Covers 25% Of 2017 Budget Needs
  • 6 days District Judge Rules Dakota Access Can Continue Operating
  • 7 days Surprise Oil Inventory Build Shocks Markets
  • 7 days France’s Biggest Listed Bank To Stop Funding Shale, Oil Sands Projects
  • 7 days Syria’s Kurds Aim To Control Oil-Rich Areas
  • 7 days Chinese Teapots Create $5B JV To Compete With State Firms
  • 7 days Oil M&A Deals Set To Rise
Ronke Luke

Ronke Luke

Ronke Luke has experience advising senior executives (including at the ministerial level) on initiatives to develop and increase uptake of advanced energy and environmental technologies…

More Info

Which East African Nation Will Win The LNG Race?

Which East African Nation Will Win The LNG Race?

BG Group’s assets in Tanzania give Shell another chance at East Africa’s huge gas opportunity. However, in the race to become Africa’s newest LNG exporter, Mozambique appears to be leaping ahead of Tanzania, its northern neighbor.

As in West Africa, independent exploration and production firms led entry into East Africa and racked up success unlocking not only new oil plays but also enormous gas plays, where none had been expected.

The industry took notice when Ophir Energy and BG Group announced huge gas finds offshore Tanzania in 2010. By 2012, Statoil partnered with Exxon Mobil and Ophir and BG Group had discovered approximately 30 trillion cubic feet of recoverable gas resources, tripling Tanzania’s reserves. But it was Anadarko’s and Eni’s “game changing” gas finds – over 75 trillion cubic feet – in Mozambique’s waters in 2011 that propelled the country into the spotlight. Mozambique’s huge reserves, estimated at 250-trillion cubic feet of gas, set off intense competition between oil and gas firms eager to stake a claim. Related: Four Opportunities Presented By Stabilizing Oil Prices

The size of the finds and proximity to Asia’s LNG markets has made East Africa irresistible to Asian state-owned companies. They have invested heavily to gain a foot hold.

Thailand’s PTT Production and Exploration fended off Shell’s challenge to buy Cove Energy’s 8.5% stake in the Anadarko-led consortium developing Mozambique’s Rovuma Area 1. In 2013, China National Petroleum Corporation paid ENI $4.2 billion for a stake in its Mozambique fields and planned to build an LNG plant. Anadarko and Eni are planning to build four LNG plants with annual production capacity of 20 million tons.

The project will be second in size only to Qatar’s Ras Laffan. With partners from Thailand’s, India’s and Japan’s national companies, Anadarko’s LNG project is the first without dominant involvement of a super major. In Tanzania, Singapore’s Pavillion Energy invested $1.28bn for a 20% stake in Ophir’s fields. By securing stakes in East Africa, Asian governments are hedging against future LNG prices. Related: Could The New Silk Road End Old Geopolitical Tensions?

Shell’s acquisition of BG Group is welcomed in Tanzania. Regional industry commentators suggest that Shell’s expertise in dealing with national governments, technical know-how and “appetite for risk” will boost Tanzania as it competes with Mozambique for limited capital. It might be too optimistic that Shell’s entry into Tanzania will have any immediate impact on projects currently in development. It is likely distracted with the merger details. BG Group continues with its pre-front end engineering and design (FEED) studies of its proposed Tanzania LNG project with plans to enter FEED in 2016.

Meanwhile, in its first quarter 2015 earnings call, Anadarko dismissed all suggestions that it was seeking to monetize its Mozambique assets and noted that all indicators (e.g. reserve certifications, project financing, and securing off-take) remain positive for submitting a Plan of Development to Government of Mozambique in fall 2015 and getting to Final Investment Decision (FID) later in 2015 or 2016.

It announced in mid-May that it had selected a FEED contractor for its onshore LNG park in Mozambique. Moving forward with this mega project is a major statement by an independent as majors have stalled or canceled projects as oil prices have declined. In 2015, Statoil, BP and ExxonMobil have announced $45 billion in cuts in LNG projects. Related: A New Giant Among Oil Traders

Even with such cuts, Tanzania and Mozambique are competing with a lot of planned supply all chasing Asia’s softer demand. Four US and Australian LNG projects are expected to come online in the next four years. Australia, currently the fourth largest LNG exporter, is planning to invest A$200 billion in the next wave of LNG projects as it presses to become the world’s third largest LNG exporter. It worries that low oil prices and high costs of development in Australia, undermine its geographic advantage to Asian LNG markets, compared to East Africa’s lower costs.

That gives Tanzania and Mozambique advantages over their competitors. But there are still serious obstacles. The gas fields are in remote areas with little or no infrastructure. Gas sector production regulation is still being developed. Those challenges will need to be overcome if East Africa’s LNG potential can be realized.

By Ronke Luke Of Oilprice.com

More Top Reads From Oilprice.com:

Back to homepage

Leave a comment
  • R C Johnson on May 28 2015 said:
    East African LNG gas development will, seemingly from reports to date, be less costly; with a post production cost being partly in favour of Australia owing to the frieght differential to Far Eastern demand ports.
    Competition from the USA and potential new Arab Gulf LNG production, along the Russian LNG and natural gas supplies provides both the Near and Far East consumers with options. The race to cover the demand is certainly under way.
    For East Africa a key factor of concern rests with the gas resource geology and recovery costs, and the efficiencies in infrastructure and logistics being applied; the production companies involved have matching capabilities in completing their respective LNG deliverability functions.
    In undeveloped Mozambique and Tanzania the challenges to overcome will involve the State control and support functions to assist in providing for the completion of resource development. The examples of lack of diligence on record thus far have cost both countries time in years. Australia has the advantage on time to first deliveries as its LNG industry is partly developed.
    The use of floating liquefaction (FLNG) looks to provide a head start compared to land based option. The Shell Prelude project off West Australian looks to lead the way in the race using an FLNG route.
    The demand from the Far East will mostly cover the LNG market production for Mozambique and Tanzania. However the potential African continental demand for other forms of gas commercialisation, in particular considering projections for the new development frontier of Sub Saharan Africa and its ability to provide for an increased industrial focus, could provide a useful balance on the long term investment for the gas reserve owners and developers in Mozambique and Tanzania.
    Apart from East Africa the continent has gas options in its Western region whose LNG from gas resources compete for the EU demand.
    In addition South Africa alone must not be excluded should it chose to use its shale gas reserves, in particluar as its industrial base is well advanced over the balance of the regions economies.
    The gas picture in Africa has significant potential. Selective approaches to the many business options underway and still on the drawing board, will provide useful long term attraction to investors.
    For Tirion: 40 years in resource devleopment in Sub Saharan Africa.

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News