Mozambique 26 Feb: Gas floats, coal sinks
Good afternoon. The big news in Mozambique this week was government approval of Eni’s expanded floating LNG project. However, this is only one more step towards a final investment decision; Eni and its consortium partners still need to raise financing for the $8-9 billion project and there is speculation that, at today’s oil prices, some of the shareholders will struggle to cover their portion of the equity.
SEE: Eni wins government approval for Mozambique floating LNG project
Eni has, however, improved the per unit cost of the project by significantly expanding the capacity of the floating facility, from 2.5-3 million tonnes per annum to 3.4 mtpa.
SEE: Eni expands Mozambique floating LNG plans by 36%
While the project, which should go online in 2019 or 2020, offers the opportunity of quick(ish) revenues for the government, the nature of the offshore project means Mozambique will miss out on crucial local content opportunities and domestic gas supply.
However, some investors have argued even if Rovuma gas could be delivered to the local market in three years, the north of the country still lacks the necessary infrastructure to transport and process it.
This point is illustrated on a smaller scale by the Kuvaninga power plant near Chokwe, in the southern province of Gaza. Construction of the plant was completed in 2015, but it may be more than year before it starts producing power because of problems delivering the gas from Sasol’s fields in Inhambane.
SEE: EDM gas supply delays start of 40 MW power plant in Chokwé
Eni announced the approval of the Coral FLNG plan of development on Wednesday, the same day Dutch diplomat Jan Huesken reminded a conference in Maputo that foreign companies, looking to invest billions in Mozambique, are following the country's alarming political developments closely.
On Thursday, Federica Mogherini, the former Italian foreign minister who is now head of the European Union’s foreign service, warned Mozambique of “the risk of an undeclared civil war”, and called for dialogue between the government and Renamo.
A hopeful sign emerged this week when President Filipe Nyusi called a meeting of the national defence and security council, which resolved to “create the conditions” for dialogue between Nyusi and Renamo leader Afonso Dhlakama. It remains to be seen whether this will lead to anything concrete, but in the meantime attacks on Mozambique’s main highways continue at the rate of about two per day.
SEE: Gunmen defy military escort to attack convoys on Mozambique highway
As Joseph Hanlon pointed out in his latest bulletin this week, however, fatal collisions on the roads are still a much greater threat to life than Renamo attacks - a fact which makes a bit of a mockery of the recent spate of travel bans and warnings from international organisations.
The Tete coal industry had a moment of deja vu this week when Vale announced it was writing $2.4 billion off the value of its coal mine at Moatize. Observers could not help but be reminded of Rio Tinto’s $3bn write-off in 2013, which was followed by a cut-price sale to India’s ICVL. Rumour has it that Vale is now looking to do likewise, and sell all its Mozambique assets.
SEE: Vale writes $2.4bn off its Mozambique coal assets
Finally, Zitamar revealed today that a key post in the Mozambique state oil and gas company remains vacant. Eduardo Naiene quit as head of ENH Logistics in December last year, and a replacement has yet to be chosen. Meanwhile, the role of the company remains somewhat undefined - and a decision on that could affect the way Anadarko proceed with their onshore LNG developments. Eni must be glad for now they went down the floating route.
SEE: ENH Logistics still leaderless as Pemba wranglings continue
Have a great weekend.