ASIA NEED MOZAMBIQUE
Countries across Asia are quietly reaching deals to import liquefied natural gas (LNG) from Mozambique, which could transform its economy and give it a front-row seat in tapping rising global gas demand.
The unannounced agreements, five in total, show how war-scarred Mozambique is elbowing past rivals from the United States to Australia by offering flexible contract terms on 20-year deals.
U.S. oil major Anadarko Petroleum is building the first two of up to 10 plants in Mozambique to liquefy gas for export.
Its gas finds in Area 1 of the country's Rovuma Basin will feed the initial 10 million tonne per annum (mtpa), $23 billion export project, which is due to start by 2021.
Preliminary deals have been reached to sell its LNG to China National Offshore Oil Corp, Japan, Indonesia's state-run Pertamina, the United Arab Emirates, Thailand's PTT and companies in India, according to company and industry sources close to the talks.
Firming these deals is critical to secure bank financing for Anadarko and its Area 1 project partners to build the project.
If all goes as planned, Africa-focused Standard Bank expects an LNG windfall to swell the state purse of the former Portuguese colony, one of the world's least-developed nations.
It sees Anadarko's initial project adding $67 billion to government revenue over its 30-year life, rising to $212 billion once the two initial plants are expanded to six.
"The LNG cost base and pricing from our Mozambique project is competitive in today's LNG market, which is supported by the willingness of our partners to invest more than $3 billion to date in this world-class development," Steve Hoyle, Anadarko's vice-president for LNG who is leading the project, told Reuters.
He declined to comment on commercial details.
Anadarko's partners include Mitsui, Oil India Limited, Bharat PetroResources, PTT and Mozambique's state-run ENH.
Global LNG demand is expected to double by around 2035. But prices that LNG projects can charge for long-term supply are falling from historic highs as new producers crowd the market and oil prices plunge, weeding out weaker contenders.
Delays pose one of the biggest risks to Anadarko's plans, given the project has an extremely narrow window to lock in premium buyers before a surge of new supply post-2021 leaves only lower tier importers.
In private talks, the supply deals have mostly been set via Heads of Agreement accords covering two-thirds of the gas from Anadarko's flagship development, and negotiators are now trying to convert those into binding agreements by year-end, the sources said. They are likely to be announced as the project gets closer to a final investment decision.
In an industry dominated by oil-linked pricing of LNG, Anadarko is attracting clients by offering to price the fuel based on a mix of benchmarks including crude oil and U.S. gas prices, the lowest in the world due to the shale boom, according to industry sources.
Banking sources say Anadarko had been offering to partly tie forward sales of LNG to U.S. gas prices plus a premium of $5-$7 per million British thermal units (mmBtu), with crude oil forming around 70 percent of the price.
Chinese energy companies, already emerging as one of the biggest beneficiaries of new LNG exports from the United States, may also steal the show in Mozambique.
Last year CNPC paid $4.2 billion for a 20 percent stake in Eni's Area 4 LNG export venture in Mozambique to feed the world's fastest growing gas consuming country.
Now China's National Offshore Oil Corp., or CNOOC, is set to lift a comparable volume of 2-2.5 million tonnes a year from Anadarko's neighboring site in Area 1, three sources with knowledge of the matter said.
"The terms of the CNOOC deal were ironed out some time ago, and it has just been parked waiting for the project to take a final investment decision," an Area 1 project source said.
Thailand's PTT, a partner in the Area 1 venture, has agreed to take comparable volumes to China's CNOOC, a source with knowledge of the matter said.
Indonesia's Pertamina, facing falling domestic gas output and rising demand, has agreed to take 1 mtpa of LNG, two sources with knowledge of the matter said. Last month it asked for double that volume and to buy a stake in the export plant, a Pertamina company source said.
Rules on farm-ins set by the government require companies to take 10 percent or more, raising doubts among project sources if Pertamina has that much of an appetite for a stake.
The project is trying to market some supply to a consortium of small-scale Japanese buyers, which may want to take a stake, and is in advanced talks with an Indian company, the sources said.
Apart from Asia, Anadarko is also pursuing a supply deal with the United Arab Emirates, which is keen to switch to gas from burning oil to generate electricity and looking for supply to help fill a big LNG import terminal it is building, the sources said.
While Mozambique finds buyers, regional rival Tanzania is lagging as political paralysis bogs down energy legislation and delays investment decisions by project developers BG Group and Statoil, a recent Eurasia Group note said.
For the Mozambique LNG project to be developed, the government must set up a fiscal and legal framework to smooth the inflow of investments, for which parliament has set a year-end deadline.
Recent election results make that process easier as the ruling Frelimo party and its candidate, Filipe Nyusi, were returned to power.
|November, 24, 09:45:00|
|November, 24, 09:40:00|
|November, 24, 09:35:00|
|November, 24, 09:30:00|
|November, 24, 09:25:00|
|November, 24, 09:20:00|
BLOOMBERG - As Saudi Arabia led OPEC’s output cuts this year to shrink a global glut, it’s lost out on market share in the world’s biggest energy consumer. Russia in September retained the top Chinese supplier spot for the seventh straight month, while the kingdom was third.
PLATTS - The quality of Russia's key Urals crude exports towards Europe will continue to fall next year as more of the country's low-sulfur oil flows are diverted eastward to China, Russian national oil pipeline operator Transneft warned.
FT - OCI — the world’s third-largest polysilicon maker by capacity and South Korea’s biggest — this month reported a 3,373 per cent increase in operating profit to Won78.7bn ($72m) for the July-September quarter, its best performance in five years. Rival Hanwha Chemical saw third-quarter net profit jump 25 per cent to a record Won252bn.
U.S. Rig Count is up 330 rigs from last year's count of 593, with oil rigs up 273, gas rigs up 58, and miscellaneous rigs down 1 to 0. Canada Rig Count is up 41 rigs from last year's count of 174, with oil rigs up 13, gas rigs up 30, and miscellaneous rigs down 2 to 2.