Ratification of Mozambique Petroleum Law Seen By Year-End

Ratification of Mozambique Petroleum Law Seen By Year-End

The Mozambique government currently is revising its legal and fiscal packages for exploration and production, but anticipates its new petroleum law to be ratified by year-end in time for the upcoming licensing round, said Arsenio Mabote, chairman of the Instituto Nacional de Petroleo. Mozambique will seek to promote exploration in offshore areas 4, 5 and 6 in its upcoming licensing round.

The government is also developing a master plan for development of the nation's gas resources, including asset development options, optimal locations, pricing structures and social improvements.

Mozambique's significant offshore natural gas resources in the Rovuma Basin, where 12 gas discoveries have been made to date within a 31 miles (50 kilometers) radius area.

Thanks to exploration activity, the estimate of Rovuma Basin gas resources has been raised from 5 trillion cubic feet (Tcf) in 2009 to 170 Tcf in 2012.

The additional gas resources are located in two main concession areas, 1 and 4. However, more resources may exist as both areas are not fully explored and exploration efforts offshore neighboring Tanzania and Kenya will support the construction of several liquefied natural gas (LNG) plants in the region.

The development of Mozambique's gas resources will help support a number of investment opportunities within the country, including fertilizer, petrochemical, gas-to-liquids, power generation, as well as development if railways, ports and telecommunications infrastructure.

"We understand the challenges that companies face, and we want them to know that the government supports their initiatives," said Mabote.

Anadarko Petroleum Corporation, Eni S.p.A., Statoil ASA and Petroliam Nasional Berhad (Petronas) are the international operators who hold interests in Mozambique. For Anadarko, the cost associated with producing Mozambique's deepwater gas means it must pursue development of gas resources there as an LNG project. The company has no domestic use obligations in its contract, meaning that LNG exports will be its main focus.

"The government understands the stable legal framework needed, but laws need to be finalized before the project can move forward," said John Peffer, president of Anadarko Mozambique.

Despite the cost, Anadarko President and CEO Al Walker sees Mozambique and its tremendous gas resources as the right opportunity for Anadarko to meet its goal of becoming a major LNG player.

Anadarko believes its Afungi LNG development, which it is developing with Italy's Eni S.p.A, offers a cost-competitive source of LNG and a long-term strategic supply for premium Pacific Basin markets. Afungi will also be able to supply the Atlantic market as well, Peffer said.

Anadarko's recoverable gas reserves of between 35 and 65 Tcf from the Prosperidade and Atum are enough to support a two-train LNG development. Anadarko will initially focus on Prosperidade for its two LNG trains. The company expects to safely meet the 12 Tcf of gas it needs for reserve certification. It will also have between 16,000 and 17,000 acres at the project site, with plenty of room for a large scale 50 million tones per annum LNG facility. Anadarko's offshore Mozambique gas resources are enough to support its initial development several times over, and represent a "remarkable accumulation" of gas, Pepper estimated.

The discoveries that will underpin the development are located between 18 to 25 miles (30 to 40 kilometers) offshore. Peffer said the company has successfully route pipelines and flowlines around the active submarine canyons that lie offshore and are up to 1 kilometer deep.

The project currently is in the front end engineering and design phase; results of call for bids are anticipated next year. Afungi will initially deliver 20 million tonnes per annum of LNG when it comes online in 2018. The start of operations at Afungi will make Mozambique the third largest LNG exporter worldwide.

Anadarko expects to submit an environmental impact assessment for the project later this year.

The company is active throughout Africa, including Kenya and Mozambique's deepwater, and in South Africa, where the company recently acquired interests in two blocks.

"Government officials down to the district level recognize that these types of projects take time," Peffer commented. "The population doesn't quite understand this point, but the communication strategy is in place to educate the local communities."

Logistics have improved slightly since Anadarko entered Mozambique, and security offshore and onshore does not pose a major issue at this point, Peffer commented. The limited number of workers, particularly in Pemba and Palma, means Anadarko has had to bring in necessary workers. The Mozambique government sees development of its gas assets as a means of bolstering job creation and education opportunities within the country.

"We have a shared vision, and Anadarko has more than filled its commitment to promoting social and capacity building within the country," Peffer commented.

Barriers to development of Mozambique's natural gas resources include:

  • lower gas demand and prices due to recession
  • competition from shale gas resources, particularly those in China
  • capital availability
  • competition from other LNG projects in the Middle East and Australia

The Mozambique government's current efforts to reform and update fiscal and regulatory terms governing oil and gas could be a factor as well, said R. Michael Haney, director of Douglas-Westwood's Houston firm.

Despite the challenge, "we see a lot we like in the Mozambique picture," Haney told conference attendees.

Mozambique could also hold significant oil resources as well, if estimates by Total, which holds interest in offshore areas 3 and 6, are correct.

Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com


Click on the button below to add a comment.
Post a Comment
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.


Our Privacy Pledge

From the Career Center
Jobs that may interest you
Regulatory Compliance Specialist
Expertise: HSE Manager / Advisor|Offshore Position Surveying|Regulatory Compliance
Location: Houston, TX
Shipping and Receiving Specialist
Expertise: Logistics Management|Port Operations
Location: College Station, TX
United States Houston: Account Rep, Bus Dev, Sr
Expertise: Business Development|Sales
Location: Houston, TX
search for more jobs

Brent Crude Oil : $50.47/BBL 0.98%
Light Crude Oil : $49.72/BBL 1.09%
Natural Gas : $2.76/MMBtu 1.09%
Updated in last 24 hours