The Houston-based oil and gas company Anadarko is proposing to the Mozambican government the establishment of a Liquefied Natural Gas (LNG) facility in the far north of the country, which could produce a billion cubic feet of gas a day.Of the various companies exploring for hydrocarbons in the Rovuma Basin, near the border with Tanzania, Anadarko is by far the most advanced. The block it was awarded covers both onshore and offshore areas in the districts of Palma and Mocimboa da Praia in Cabo Delgado province – and in four of the seven exploratory wells that Anadarko has drilled, large deposits of natural gas have been found.
All the discoveries are in deep water offshore, and two are counted among the top ten gas discoveries world wide in 2010. The exploration is not cheap. Anadarko has so far invested 750 million US dollars in the Rovuma basin, and expects this sum to reach in excess of three billion dollars by the end of 2013. If plans for an LNG facility go ahead, that could raise investment to 15 billion dollars by around 2018. This would be by far the largest foreign investment in Mozambique to date.John Peffer, the Managing Director of Anadarko’s Mozambican operations, told reporters that he regards LNG as the only viable option. Only an LNG facility can provide the economies of scale that would make it economical to exploit gas fields that are under 1,500 metres of water and 40 kilometres out to sea.LNG is non-toxic and non-corrosive, and is generally regarded as the least environmentally damaging fossil fuel, since it has the lowest carbon dioxide emissions per unit of energy. The LNG plant would be put somewhere along the Cabo Delgado coast. Highly specialised equipment would liquefy the gas at a temperature of minus 162 degrees centigrade, which reduces the product to one six-hundredth of its volume as a gas. Special cryogenic tankers would then carry it to the export markers, likely to be in the Far East, where it would be heated and turned back into gas. The tankers are used for journeys where a pipeline would be impracticable, Such operations would require a new, dedicated marine terminal. Adapting the existing port facilities at the provincial capital, Pemba, or in the town nearest the discoveries, Mocimboa da Praia, would be out of the question.Peffer is confident that the plant Anadarko has in mind can handle a billion cubic feet of gas a day. But the exact extent of the gas discoveries is not yet clear – and a billion cubic feet may turn out to be a modest target. Perhaps twice as much could be processed, which would require a second plant.For the next couple of years, Anadarko’s priority is to continue its exploration and drilling programme in an attempt to establish the size of the gas reserves, and the characteristics of the reservoir.Peffer adds that the company has not yet given up hope of finding oil. One of the Anadarko wells did strike oil – but not in commercially viable amounts. The geology was different – while the gas discoveries are in rocks of Eocene and Oligocene age (from 56 to 23 million years ago), the oil was in Cretaceous rocks, which are at least nine million years older.This part of the Rovuma Basin has been severely affected by rifting and volcanic activity – the heat involved seems to have evaporated liquid hydrocarbons. The gas discovered is described as “very dry”, lacking the condensate that can be found in the onshore gasfields in the southern province of Inhambane,But the Anardako block covers a vast area, and exploration will continue to both north and south of the gas discoveries. Peffer stresses that striking oil can by no means be ruled out – but it is clear that Anadarko’s main priority is to develop what is known to be present, which is the vast deposits of gas.At the moment one drilling ship, the Belford Dolphin, hired by Anadarko from the Norwegian company Fred Olsen Energy, is stationed off the Mocimboa da Praia cost, above the latest discovery, at the Lagosta well. Peffer says that Anadarko will bring in a second drilling ship by the end of this year, and possibly a third one in 2012.What is in this for Mozambique? Peffer stresses that Mozambique stands to gain large sums from royalties and taxes on profits, and on the incomes of the well-paid employees working on the rigs. Jobs will be created in significant numbers during the construction of the LNG plant, although the production phase is likely to involve only between 150 and 300 highly skilled staff. But over 1,000 new jobs could well be created in companies providing Anadarko with goods and services.Arsenio Mabote, the chairperson of the National Petroleum Institute (INP), wants to see at least some of the gas used in Mozambique. He mentions projects to produce fertilizers and methanol, and also the use of gas to generate electricity for consumers in the northern provinces.But Mabote is well aware that, at its current stage of development, Mozambique could only use a very small amount of the gas. To make it viable to extract the gas, a huge anchor project is required, which would provide an adequate return on the capital ploughed into the Rovuma basin by the investors. That anchor project is Anadarko’s proposed LNG plant. “Anadarko believes it has found real amounts that will be sufficient for this project, and it will present a proposal to this effect to the government”, says Mabote. He points out that the government is a partner in all the blocks being explored in the Rovuma. In the case of Anadarko’s block (known as “Area 1”), it has 15 per cent. But in the exploration phase the government invests no capital at all – all the risk is taken by the foreign investor. Only after the extent of the reserves is proven, and the production of the gas begins will the government be obliged to invest its own resources.
All the discoveries are in deep water offshore, and two are counted among the top ten gas discoveries world wide in 2010. The exploration is not cheap. Anadarko has so far invested 750 million US dollars in the Rovuma basin, and expects this sum to reach in excess of three billion dollars by the end of 2013. If plans for an LNG facility go ahead, that could raise investment to 15 billion dollars by around 2018. This would be by far the largest foreign investment in Mozambique to date.John Peffer, the Managing Director of Anadarko’s Mozambican operations, told reporters that he regards LNG as the only viable option. Only an LNG facility can provide the economies of scale that would make it economical to exploit gas fields that are under 1,500 metres of water and 40 kilometres out to sea.LNG is non-toxic and non-corrosive, and is generally regarded as the least environmentally damaging fossil fuel, since it has the lowest carbon dioxide emissions per unit of energy. The LNG plant would be put somewhere along the Cabo Delgado coast. Highly specialised equipment would liquefy the gas at a temperature of minus 162 degrees centigrade, which reduces the product to one six-hundredth of its volume as a gas. Special cryogenic tankers would then carry it to the export markers, likely to be in the Far East, where it would be heated and turned back into gas. The tankers are used for journeys where a pipeline would be impracticable, Such operations would require a new, dedicated marine terminal. Adapting the existing port facilities at the provincial capital, Pemba, or in the town nearest the discoveries, Mocimboa da Praia, would be out of the question.Peffer is confident that the plant Anadarko has in mind can handle a billion cubic feet of gas a day. But the exact extent of the gas discoveries is not yet clear – and a billion cubic feet may turn out to be a modest target. Perhaps twice as much could be processed, which would require a second plant.For the next couple of years, Anadarko’s priority is to continue its exploration and drilling programme in an attempt to establish the size of the gas reserves, and the characteristics of the reservoir.Peffer adds that the company has not yet given up hope of finding oil. One of the Anadarko wells did strike oil – but not in commercially viable amounts. The geology was different – while the gas discoveries are in rocks of Eocene and Oligocene age (from 56 to 23 million years ago), the oil was in Cretaceous rocks, which are at least nine million years older.This part of the Rovuma Basin has been severely affected by rifting and volcanic activity – the heat involved seems to have evaporated liquid hydrocarbons. The gas discovered is described as “very dry”, lacking the condensate that can be found in the onshore gasfields in the southern province of Inhambane,But the Anardako block covers a vast area, and exploration will continue to both north and south of the gas discoveries. Peffer stresses that striking oil can by no means be ruled out – but it is clear that Anadarko’s main priority is to develop what is known to be present, which is the vast deposits of gas.At the moment one drilling ship, the Belford Dolphin, hired by Anadarko from the Norwegian company Fred Olsen Energy, is stationed off the Mocimboa da Praia cost, above the latest discovery, at the Lagosta well. Peffer says that Anadarko will bring in a second drilling ship by the end of this year, and possibly a third one in 2012.What is in this for Mozambique? Peffer stresses that Mozambique stands to gain large sums from royalties and taxes on profits, and on the incomes of the well-paid employees working on the rigs. Jobs will be created in significant numbers during the construction of the LNG plant, although the production phase is likely to involve only between 150 and 300 highly skilled staff. But over 1,000 new jobs could well be created in companies providing Anadarko with goods and services.Arsenio Mabote, the chairperson of the National Petroleum Institute (INP), wants to see at least some of the gas used in Mozambique. He mentions projects to produce fertilizers and methanol, and also the use of gas to generate electricity for consumers in the northern provinces.But Mabote is well aware that, at its current stage of development, Mozambique could only use a very small amount of the gas. To make it viable to extract the gas, a huge anchor project is required, which would provide an adequate return on the capital ploughed into the Rovuma basin by the investors. That anchor project is Anadarko’s proposed LNG plant. “Anadarko believes it has found real amounts that will be sufficient for this project, and it will present a proposal to this effect to the government”, says Mabote. He points out that the government is a partner in all the blocks being explored in the Rovuma. In the case of Anadarko’s block (known as “Area 1”), it has 15 per cent. But in the exploration phase the government invests no capital at all – all the risk is taken by the foreign investor. Only after the extent of the reserves is proven, and the production of the gas begins will the government be obliged to invest its own resources.
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