Mozambique: Financing of LNG Project Restructured

Maputo — The Mozambican government on Tuesday approved a decree altering the shareholding and financing structure of the Liquefied Natural Gas (LNG) project in Area One of the Rovuma Basin, off the coast of the northern province of Cabo Delgado.

This revision allows the entry of the French oil and gas company Total into the shareholding structure, taking the place once held by the US company Anadarko. Last year Occidental Petroleum acquired Anadarko, and immediately sold Anadarko's African assets to Total.

Speaking to reporters at the end of a meeting of the Council of Ministers (Cabinet), the Minister of Mineral Resources and Energy, Max Tonela, said the revision "also seeks to create conditions for flexibility in the development of undertakings related with the project".

Under the commitments made last year, as part of the Final Investment Decision (FID) of the project, Anadarko and its partners would only undertake later stages in developing the Golfinho and Atum gas fields in Area One after 2026. But with the entry of Total, the scenario has changed in terms of both the timetable and the revenue for the shareholders.

"With the entry of Total, an exercise has been undertaken to optimise the financing", said Tonela. "This will allow studies for presenting the second Area One onshore LNG project to take place during the term of office of the present government (i.e. by 2024)".

"This process to optimise the financing", he continued, "has also allowed a reduction in interest costs of about 1.1 billion US dollars during the construction phase and 700 million dollars during the operational phase. This will allow all the interested parties, including the Mozambican state, to make associated gains".

Tonela forecast that, thanks to this restructuring, "the amount that the Mozambican state will receive from the project will increase by a billion dollars".

As for the impact of the Covid-19 pandemic on Area One, Tonela said "we are finding ways of mitigation. The engineering work is taking place in a programmed manner. The pandemic has had some impact on questions of procurement, but these can be recovered from, since they do not endanger the overall programme for the project".

There had been an outbreak of Covid-19 at the Total work camp on the Afungi Peninsula in Cabo Delgado, said Tonela, "but work is under way to disinfect the camp, and we envisage that it will be declared free of Covid-19 by the end of the month".

Total is expected to sign financing agreements in June with about 20 banks, to a total sum of 15 billion dollars.

Those agreements, plus the disinfection of the Afungi camp, will clear the way for resumption of the building of the two LNG processing factories envisaged by the project.

Total heads the Area One consortium with a participation of 26.5 per cent. Its partners are the Japanese company Mitsui (20 per cent), PTTEP of Thailand (8.5 per cent), Mozambique's National Hydrocarbon Company, ENH (15 per cent), and three Indian companies, ONGC Videsh, Beas and Bharat Petro Resources (10 per cent each).

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