OPINION: This past week saw two significant milestones for the ground-breaking Mozambique liquefied natural gas project — the finalisation of Total’s acquisition of Anadarko Petroleum’s operating stake and the US Export-Import bank approving a $5 billion loan for the development.
Total’s formal entry into the Mozambique LNG project concludes Anadarko’s long association with the country.
Ever since 2010, when Anadarko hit big volumes of gas with its breakthrough Windjammer-1 wildcat (it was actually searching for oil) in the Rovuma basin, Africa watchers expected it to exit the country because it did not have enough LNG expertise — or funding — to lead such an enormous project.
There was talk that all the supermajors were interested in Anadarko’s stake, but nothing materialised — even when the US independent farmed down its original stake.
Shell was interested in Area 1 but it refused to get into a bidding war with PTTEP for Cove Energy’s stake. Before ExxonMobil snapped up a major stake in the adjacent and equally gas-rich Area 4, there were rumours it would take out its compatriot’s interest in Area 1. Again, nothing happened.
It is unclear why Anadarko’s exit took so long, but the oil price crash did not help and neither did the time it took to wrap up LNG sales deals.
Perhaps Mozambique’s politics, its lack of oil and gas experience plus fiscal and legislative issues put off potential investors.
Occidental’s successful bid for Anadarko was not driven by the Mozambique assets, which Oxy quickly decided to sell to Total. With Total and ExxonMobil respectively helming Mozambique LNG and the yet-to-be sanctioned Rovuma LNG project, observers could be forgiven for thinking it should be plain sailing from now on. But there are challenges ahead.
In Cabo Delgado province — home to the LNG site — an Islamist insurgency could directly threaten the 40,000 or so workers needed to build the liquefaction complex.
And with global warming what were once one-in-100-year cyclones may become more frequent, with the capacity to destroy infrastructure.
Stormy seas may yet lie ahead.
(This is an Upstream opinion article.)