Galp negotiates sharing of gas in Mozambique

The Galp consortium, led by Italian firm ENI and responsible for the exploration and production of natural gas in Rovuma basin Area 4, has agreed with the U.S. Anadarko concern in Area 1 to share natural gas reserves in border areas between the two concessions.Where reserves in two or more blocks are linked, unitization between stakeholders in the exploration areas is crucial to avoid future conflicts of interests.In the Area 4, where the Portuguese oil company holds a 10 percent stake, more than 85 trillion cubic feet (tcf) of natural gas have been identified, a discovery that will catapult Mozambique into the club of the world's leading producers.To date, about 180 tcf of natural gas have been discovered in the waters off the Mozambique coast – enough to supply Germany, France, Belgium and Italy for almost two decades.The cooperation agreement involves the Mamba and Prosperity reserves in Areas 4 and 1 respectively. The fields will be developed separately until production of 24 tcf has been reached, after which extraction will be shared through a joint venture capitalised equally by the two consortia.According to ENI, the unitization agreement has the endorsement of all 11 concessionaires and "represents a fair deal for all parties involved", adding that the arrangement still needs the approval of the Mozambican government.

Through ENI East Africa, ENI controls 50 percent of Area 4. Besides Galp, the Korean Kogas and the Mozambican National Hydrocarbon Company (ENH) have 10 percent each, leaving the Chinese CNPC with the remaining 20 percent. Anadarko leads concession Area 1, with 26.5 percent. Its partners are the National Hydrocarbon Company (15 percent ), Mitsui E & P Mozambique Area 1 (20 percent ), Bea Rovuma Energy (10 percent), BPRL Ventures Mozambique (10 percent), ONGC Videsh (10 percent), and PTTEP Mozambique (8.5 percent).Situated at a depth of about 2,600 metres, the Mozambican natural gas reserves require substantial capital investment, some of which will be shared by the two consortia, like the onshore liquefaction infrastructure, about which a joint investment decision is expected in 2017.The falling price of natural gas, as well as the contraction of consumption in Asia, a major customer for the fuel, has resulted in the delay in the conclusion of long-term sales contracts, which are essential to facilitate project financing.Oil companies operating in Mozambique will invest US$31 billion in the coming years in natural gas exploration in the north, president of the National Hydrocarbon Company Omar Mitha said recently.ENI also revealed that it will soon award the contract for construction of the Rovuma basin floating platform. The infrastructure, the transport and the on-site installation are expected to cost the consortium US$5 billion, with production scheduled to start in 2020.