ExxonMobil and Total are in negotiations over their massive LNG projects in Mozambique, with each seeking to extract more gas from a shared field that straddles the two developments and cut costs, three sources familiar with the matter told Reuters.

The talks between the energy majors also involve the Mozambican government, according to the sources, as it has to give final approval to any new agreement.

The field that straddles the projects happens to contain gas that is thicker and therefore cheaper to extract and convert into LNG than reserves elsewhere in the projects.

The volume each project could extract from the shared area was set out in a 2015 “unitisation” - or resource-sharing - agreement. However both US major ExxonMobil and France’s Total are now renegotiating that contract with each other, the sources said.

The companies are looking to cut costs wherever they can, bruised by a Covid-19-induced collapse in global oil and gas prices and facing a worsening security situation in Mozambique.

Across the industry, most companies have been forced to delay decisions on new LNG projects and write down investments in existing production plants, in stark contrast to last year’s record level of approvals for plants.

Success in the talks could be particularly important for ExxonMobil, which still has to woo investors ahead of a delayed final investment decision on its $30 billion Rovuma LNG project, which the sources now don’t expect until early 2022.

The FID on Total’s $20 billion Mozambique LNG project was made in June 2019.

The current contract was signed by Eni and Anadarko. In 2017 Eni sold a stake in the Rovuma venture to Exxon, which is now the project operator, while Anadarko sold Mozambique LNG to Total last year.

It allows the projects to extract a combined 24 trillion cubic feet of gas from the “straddling” reserves, with a 50/50 share in phase one of development.

Now Exxon and Total are trying to rework the agreement to increase extraction from the straddling reserves as a way to boost efficiency and increase their projects’ annual LNG production, according to the sources.

“They want to use the cheapest gas first - which is the straddling resources,” said one of the sources.

Asked about the negotiations, an Exxon spokesman said: “As a matter of practice, we do not comment on third-party rumour or speculation.”

“ExxonMobil continues to actively work with its partners and the government to optimise development plans by improving synergies and exploring opportunities related to the current lower-cost environment,” he added.

Total said the operators of the two projects “continue working together to maximize synergies and optimise future phases of development”.

Mozambique’s state oil and gas company ENH, which owns 10% of Rovuma LNG, and 15% of Mozambique LNG, referred Reuters’ questions to the National Petroleum Institute (INP), the body that manages the nation’s energy development.

The INP did not provide answers to Reuters questions.

LNG

ExxonMobil and Total in talks over Mozambique LNG resource-sharing deal: report