Supermajors ExxonMobil and Total are renegotiating a natural gas resource sharing deal for their respective liquefied natural gas (LNG) projects offshore Mozambique, Reuters reports, citing sources with knowledge of the talks.
Exxon and Total are leading the Rovuma LNG and the Mozambique LNG projects, respectively, and are looking to renegotiate a 2015 deal on using resources from the basins that would supply gas to their respective projects. Both oil majors, who are looking to cut project costs, want to use the resources from a shared field first because they are cheaper to extract.
The 2015 deal stipulates that Exxon and Total extract a total of 24 trillion cubic feet of natural gas from the "straddling" reserves in a 50/50 share in the first phases of their projects.
"They want to use the cheapest gas first - which is the straddling resources," one of Reuters' sources said.
The renegotiation of the gas extraction deal also involves the government of Mozambique, which has to sign off on any new resource-sharing deal, the sources told Reuters.
The Total-led Mozambique LNG Project, for which the US$20-billion Final Investment Decision (FDI) was taken in 2019, is on track to deliver LNG in 2024, Total says.
In July, Total secured as much as US$16 billion in funding for its LNG project in Mozambique despite the supply glut and demand decline in the LNG market.
The financing agreement "shows continued progress on project implementation despite security challenges and lower medium-term hydrocarbon prices, raising the prospect of significant positive effects on Mozambique's growth and public finances in the longer run," Fitch Ratings said after Total secured the funding.
While Total secured financing for its project, ExxonMobil has delayed the FID on its US$30-billion Rovuma LNG project to next year due to low commodity prices and Exxon's need to cut investments globally. This will delay the start of production by one or two years, to around 2025-2026, Fitch says.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.