29 October 2018

Mozambique: Indian Company to Invest 800 Million Dollars in LNG

Maputo — The Bharat Petroleum Corporation Ltd (BPCL), which is owned by the Indian state, plans to invest up to 800 million US dollars in the liquefied natural gas (LNG) project in northern Mozambique where it already holds a 10 per cent stake, according to reports in the Indian press.

BPCL is one of the minority shareholders in Rovuma Basin Offshore Area One off the coast of Cabo Delgado province. The operator of Area One is the US company Anadarko Petroleum, with a 26.5 per cent participating interest.

The other partners in the Area One consortium are the Japanese company Mitsui (20 per cent), PTT of Thailand (8.5 per cent), two other Indian companies, ONGC Videsh (16 per cent) and Oil India (four per cent), and Mozambique's own National Hydrocarbon Company, ENH (15 per cent).

The consortium plans to build an initial two LNG factories (known as "trains") onshore in the Afungi Peninsula, in Palma district. They will have a total capacity of 12.88 million tonnes of LNG per year.

The 800 million dollars mentioned by BPCL is over and above the 703 million already paid for its ten per cent stake in Area One. This will be BPCL's largest investment in an upstream project outside of India.

The BPCL announcement is another step towards the Final Investment Decision (FID) on Area One. The FID is expected to be announced some time next year.

Most of the necessary conditions for an FID have already been met. The legal and contractual framework for the LNG project has been agreed between the consortium members and the Mozambican government, and sale and purchase agreements are being firmed up with potential buyers.

These must reach a critical volume of nine million tonnes a year. That figure could be reached by the end of this year or in early 2019. Only then can the terms and conditions of project funding be firmed up.

"Assuming that the project cost is going to be somewhere around 20 billion dollars, we are anticipating that 33-37 per cent will be equity and the balance would be debt", said a BPCL Executive. "Once, that is finalised, we are good to reach the FID stage".

Out of the $20-billion project cost, BPCL will have to contribute equity of about 800 million.

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