5 February 2019

Mozambique: Anadarko Announces Further LNG Sales Agreements

London — The Texas-based Anadarko Petroleum Corporation on Tuesday announced that Mozambique LNG1 Company Pte Ltd has signed agreements with Tokyo Gas, Centrica and Shell for the long-term supply of LNG (Liquefied Natural Gas) from the northern Mozambican province of Cabo Delgado.

Mozambique LNG1 is owned by Anadarko and its partners in the consortium which is developing the infrastructure to extract and process natural gas from Offshore Area One in the Rovuma Basin.

Under the agreement, Tokyo Gas and Centrica will purchase 2.6 million tonnes of LNG per annum from the beginning of production until the early 2040s. Centrica is the parent company of British Gas, while Tokyo Gas is the main supplier of natural gas to Tokyo and several other Japanese cities. The two companies signed a heads of agreement with Anadarko last June and the Tuesday agreement formalises a binding contract.

According to Mitch Ingram, Anadarko Executive Vice President, International, Deepwater and Exploration, "this innovative co-purchasing agreement with Tokyo Gas and Centrica will ensure a reliable supply of clean-burning natural gas to help meet the energy demands of Japan and Europe".

"With the vast resources we have discovered in Area One and our capability to compete in global LNG markets, Mozambique LNG is poised to become a key LNG supplier for decades to come", Ingram added.

Anadarko also announced a binding agreement with Shell for the purchase of two million tonnes of LNG per annum for thirteen years. Ingram pointed out that this brings the total long-term sales to over 7.5 million tonnes per annum with "additional deals expected in the near future".

Last Friday, Anadarko announced a sale and purchase agreement with the Chinese oil company CNOOC for the purchase of 1.5 million tonnes of LNG per annum for thirteen years. Analysts expect Anadarko to take its Final Investment Decision for the development of the LNG project once it has reached sales covering 8.5 million tonnes per annum which now looks on track to take place in the first half of this year.

Offshore Area One is estimated to hold 75 trillion cubic feet of recoverable natural gas. To monetise the gas Anadarko will pipe it to Palma in the north of Cabo Delgado province where it will be liquefied and shipped to clients worldwide.

The Anadarko project will be Mozambique's first onshore LNG development. It will initially consist of two LNG factories (known as "trains") with the capacity to produce 12.88 million tonnes of LNG per year. Anadarko plans to expand the project in stages up to a maximum of 50 million tonnes a year. In addition, Area One will supply 100 million cubic feet of natural gas per day for domestic use in Mozambique.

It is expected that LNG production will commence in 2024. However, this will not be the first project to produce LNG from the Rovuma Area. The consortium operating Offshore Area Four of the basin, headed by the Italian energy company ENI, has opted to build a floating LNG unit that will sit on a platform above the Coral South Field, and it is expected to produce its first LNG by 2022.

Anadarko is the operator of Offshore Area One with a 26.5 per cent working interest. Its partners are Mozambique's National Hydrocarbon Company ENH (15 per cent), the Japanese company Mitsui (20 per cent), the Indian companies ONGC Videsh Ltd, Beas Rovuma Energy Mozambique Ltd and BPRL Ventures Mozambique (with 10 per cent each), and PTTEP of Thailand (8.5 per cent).

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