After attacks, ExxonMobil eyes revamp of stalled LNG megaproject in Mozambique

ExxonMobil is examining an alternative construction approach for its stalled Rovuma liquefied natural gas development in Mozambique, with a view to accelerating the project schedule, increasing liquefaction capacity and reducing the security risk to people on the ground in restive Cabo Delgado province.

Driven by surging demand for gas and advances in liquefaction plant construction techniques, the US supermajor is keen to push Rovuma LNG forward, but wants to significantly improve the economics of what was originally a two-train, 15.6 million tonnes per annum project with a price tag of about $24 billion.

Three sources said the US giant is now studying the benefits of modular construction, compared with the conventional stick-built approach, triggered by the success that Venture Global has had in the US using mid-scale — as opposed to large — trains at its Calcasieu Pass LNG scheme in Louisiana and three other domestic projects.

Everybody's doing it

“Venture Global have done it really well and everyone is copying them,” said one source familiar with ExxonMobil’s philosophy.

“Everybody is moving to mid-scale trains, and a necessary consequence of mid-scale trains is less stick-build and a more modular approach,” he added.

“It’s a lot quicker and it’s the cheapest way to build LNG trains,” said the source. “You always need work at site — it’s just the duration of the construction period is less. So instead of five and half years for mega-trains you’re looking at three years.”

Another source close to the Rovuma project confirmed this is the route ExxonMobil is now working on.

“ExxonMobil… is thinking about which concept is most economically optimum… it may introduce the modular concept.”

While the base-case is still to use Air Products X (APX) liquefaction technology for two mega-trains, this source said a modular approach would see a switch away from APX.

“APX is still alive but they’re thinking about other ideas as well. They want to minimise physical construction work in Mozambique [due to security issues] so they’re trying to introduce a modular concept,” he argued.

A stick-built philosophy would see equipment and materials delivered item by item to the project’s construction site at Afungi, requiring a lot of on-site construction activities and many expensive foreign workers in an environment with a significant security risk.

“They’re thinking smaller capacity and multiple trains,” said the second source, pointing out that by using this approach, Rovuma’s total LNG capacity could hit 18 million to 19 million tpa, significantly larger than the 15.6 million tpa originally envisaged with a pair of mega-trains.

A third project watcher agreed that ExxonMobil is now pursuing modular construction, pointing out that the need to handle larger modules would increase the scale of coastal facilities required in Cabo Delgado to import these bigger structures.

Cost savings unclear

It is unclear what cost savings could derive from opting for a modular approach.

However, an indication could come from Venture Global which said in May that its 13.33 million tpa Plaquemines LNG facility in the US and the associated Gator Express pipeline cost about $13.2 billion.

One source suggested that a modular approach could even work out as more expensive than stick-built, but if security is ExxonMobil’s priority then that is a cost that “may have to be accepted”.

This engineering source argued there is negligible difference in the capital expenditure per tonne between small, mid-size and large trains, with the main benefit of smaller trains being early production, while larger trains have better operating costs over their lives.

Discussing the modular approach on its website, Venture Global said: “Our model is fundamentally less risky than more common, highly customised stick-built projects that are constructed almost entirely onsite by large workforces over longer periods of time.

“Execution risks and installation times have been dramatically reduced through the delivery of fully complete modules,” it said, adding that its design “will soon be the new industry standard, with factory-built, mid-scale, modular plant design replacing the traditional large scale, custom built, plant configurations in the US”.

At Calcasieu, Venture Global used 18 liquefaction modules to build a 10 million tpa facility, setting a global benchmark of just 29 months from taking a final investment decision through to first exports.

ExxonMobil was due to take a final investment decision on Rovuma LNG in 2019, but this kept getting delayed due to LNG market conditions, Covid-19 and costs.

A consortium of JGC, Fluor and Technip Energies has a conditional engineering, procurement and construction contract to build the Rovuma trains.

Insurgent attack

In March last year, attacks by Islamist insurgents on Palma — close to the Afungi construction site that will host its liquefaction trains and also those for TotalEnergies’ Mozambique LNG scheme — ended attempts to sanction the project, with Upstream reporting 16 months ago that the final investment decision had slipped to 2023.

A well-placed source said 2023 is still the most likely date for project sanction but suggested it could slip into early 2024.

If the modular approach is adopted, first exports could potentially start in 2027 or 2028.

ExxonMobil declined to comment on its potential change in construction approach.

Due to the insurgency, Mozambique LNG remains under force majeure.

Troops from Rwanda and the Southern African Development Community have helped greatly improve security in the Palma-Afungi area and Mocimboa da Praia port, but insurgents are still active.

According to Cabo Ligado, which monitors violence in the area, on 9 July insurgents assaulted a security forces position at Pundanhar in Palma district with mortars, potentially the biggest attack in Mozambique since overseas troops arrived last year.