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Eni steals march on East African LNG rivals with Mozambique plant approval

Comments (0) Africa, Business, Latest Updates from Reuters

MILAN (Reuters) – Italy’s Eni said on Wednesday it has won approval from the Mozambique government to build its planned Coral floating liquefied natural gas plant.

The company, which aims to sell all the LNG from the plant to British oil company BP, is expected to make a final investment decision this year but has now overcome one of the biggest hurdles.

The pace of development of giant gas export schemes has slowed globally as liquefied natural gas prices have plummeted with oil prices, prompting many companies to delay funding decisions until business conditions brighten.

Eni is moving ahead in Mozambique despite the added challenge of using a relatively untested technology to ship the gas.

Its floating LNG (FLNG) export plant will be moored above the Coral gas field, containing 5 trillion cubic feet of gas, in resource-rich waters off Mozambique.

One of the world’s poorest countries, Mozambique is hoping to fuel future prosperity with revenue from an estimated 180 trillion cubic feet of offshore gas.

Eni’s plans include drilling six subsea wells and installing a floating LNG facility with a capacity of around 3.4 million tonnes per year.

Regional LNG rival Tanzania has struggled to match Mozambique’s pace of progress in getting its own fledgling industry off the ground, hamstrung by regulatory uncertainty and other factors.

Large latent capacity in the United States to export LNG at relatively low cost has also raised the competitive bar for what rival projects elsewhere in the world must do to attract customers, industry sources say.

LNG prices are around a quarter of what they were two years ago as a wave of new supply has overcome demand growth, depressing the market, with yet more supply on the horizon as the United States starts exporting.

Eni CEO Claudio Descalzi said approval of the Coral POD was a historical milestone for the development of the group’s discovery of 85 trillion cubic feet of gas in the Rovuma Basin.

“It is a fundamental step to progress toward the final investment decision of our project which envisages the installation of the first newly built FLNG facility in Africa and one of the first in the world,” Descalzi said.

Eni is the operator of Area 4 with a 50 percent indirect stake owned through Eni East Africa which in turn holds 70 percent of the Area.

U.S. energy company Anadarko Petroleum plans to build an onshore LNG export scheme in Mozambique, but is expected to lag Eni’s project.


(By Oleg Vukmanovic and Stephen Jewkes. Editing by Francesca Landini and Susan Fenton)

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Tanzania finalises land deal for delayed LNG project

Comments (0) Africa, Business, Latest Updates from Reuters

DAR ES SALAAM (Reuters) – Tanzania said on Friday it had finalised a land acquisition for the site of a planned liquefied natural gas (LNG) plant and was now working to compensate and resettle villagers to move forward on a long-delayed project.

Tanzania’s natural gas reserves are estimated at more than 55 trillion cubic feet (tcf) and the central bank believes 2 percentage points would be added to annual economic growth of 7 percent simply by starting work on the huge plant that would draw in billions of dollars of investment.

BG Group, being acquired by Royal Dutch Shell, along with Statoil, Exxon Mobil and Ophir Energy plan to build the onshore LNG export terminal in partnership with the state-run Tanzania Petroleum Development Corporation (TPDC). They aim to start it up in the early 2020s.

But their final investment decision has in part been held up by delays in finalising issues related to the site.

“After securing the title deed, the law requires the owner to pay compensation to the relevant parties based on a valuation done by the chief government valuer,” TPDC said in a statement.

TPDC now owns title deed for some 2,071.705 hectares of land that have been set aside for the construction of the planned two-train LNG terminal at Likong’o village in the southern Tanzanian town of Lindi, which is located close to large offshore gas finds.

Another 17,000 hectares of land around the site for the proposed LNG terminal has been allocated for an industrial park.

The land was bought from large landowners and some individual villagers.

Tanzania’s new president, John Magufuli, has promised more urgency in decision-making, responding to a frequent complaint from businesses. One example has been delays in finalising a site for the multi-billion dollar LNG plant that will exploit huge offshore gas finds.

Oil companies were unable to gain access to the site until the land purchase, analysts say.

“The next key thing to watch is how quickly a host government agreement is executed between the Tanzanian government, TPDC and IOCs (international oil companies),” Ahmed Salim, senior associate at consultancy Teneo Intelligence, said in a note to clients.

East Africa is a new hotspot in hydrocarbon exploration after substantial deposits of crude oil were found in Uganda and major gas reserves discovered in Tanzania and Mozambique.

Mozambique’s plans to build an LNG plant have moved more swiftly. With other LNG projects moving ahead around the world, the best deals for long term gas sales contracts will likely be secured by those who come on stream first, analysts say.


(Reporting by Fumbuka Ng’wanakilala; Editing by Drazen Jorgic and Mark Potter)

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