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Negotiations Concluded: HGA, PSA on Tanzanian LNG to Be Signed in a Few Weeks

Section: Gas Monetization · May 22, 2023 · No comments |

Norway’s Equinor and UK based Shell Plc have concluded negotiations on key agreements on the Tanzanian LNG development with the Government.

“Subject to successful completion of the assurance process over the coming weeks”, says Jared Kuehl, Shell’s Vice President and Country Chair for Tanzania, “we anticipate signing a Host Government Agreement (HGA) that covers the onshore elements of the project, and a Production Sharing Agreement (PSA) that oversees its upstream component”.

Unni Fjaer, Managing Director of Equinor Tanzania, notes: “Negotiations on key agreements between the international energy companies (IECs) and the Tanzanian government are now concluded, and the documents are now subject to final reviews and approvals before their expected signing in the following weeks”.

Shell’s Kuehl describes the update as “a significant milestone, on the long path to realising such a major project like Tanzania LNG, with the next steps involving a period of time of detailed engineering design work”. He says that Equinor and Shell, “as joint operators, are pleased with the steps forward and remain focused on continuing to work together with our partners (ExxonMobil, MedcoEnergi and Pavilion Energy), TPDC and of course the Government of Tanzania.”

Equinor’s Fjaer thanks “the Tanzanian government, the negotiating team from Equinor, Shell, ExxonMobil, Medco, Pavilion and TPDC for their hard work throughout this process”. She adds that the end of negotiations “paves the way for the series of milestones that need to follow to realize this fantastic LNG opportunity for the country and the world.”

The deal will allow the two European E& P giants to start engineering work on a project that will pump over 1.5Billion cubic feet per day of gas in three deepwater blocks to a 10Million-15Million tonne per annum LNG plant on the Indian Ocean coast town of Lindi.

IMF Official Expects 30MMTPA of LNG to be online in Mozambique by 2029

Section: Gas Monetization · May 1, 2023 · No comments |

Thibault Lemaire, an economist at the International Monetary Fund, has expressed the view that both the ExxonMobil led Rovuma Basin LNG project and the TOTALEnergies operated Mozambique LNG facility will be online by 2029.

Noe of these two companies have been definitive about dates of project delivery.

The 13Million Metric Tonnes Per Annum TOTAL operated project, which took Financial Investment Decision in 2019, is held up four years after the FID by the security issues in the surrounding areas outside the perimeters of the site, on the Afungi Peninsula in Cabo Delgado Province, in Mozambique’s far north.

The 15MMTPA ExxonMobil led facility has not reached financial close.

But Mr. Lemaire, a French national covering African projects, is a ranking executive at the IMF, so is expected to have searching insight.

He told the Portuguese news agency Lusa that he expects the consortiums led by TOTALEnergies and ExxonMobil to start gas production in Mozambique in 2027 and 2029, respectively.

“Two onshore liquefied natural gas exploration projects are expected to start production in 2027 and 2029, which will have a positive impact on growth via production, tax revenues and the current account,” LemaIre said, noting that TOTAL would return to Mozambique after work was suspended due to violence in the north of the country and that ExxonMobil would soon make a positive final investment decision for Mozambique.

The projects, to be both sited onshore with long, part subsea pipelines to the deepwater reserves below 2,00metre water depth in the Indian Ocean

Lemaire spoke with Lusa, following the release of the report on forecasts for sub-Saharan Africa, presented as part of the Spring Meetings of the IMF and World Bank.

The IMF expects Mozambique’s economic expansion to accelerate, after the 4.1% growth recorded in 2022, an increase from the 2.3% recorded in 2021, following the worst phase of the pandemic, and with recoveries in the hotel, transport and communications sectors. “For 2023, and in the medium term, we expect a new recovery, growth of 5% in 2023 will be driven by the extractive industries, including the first LNG facility: the 3.4MMTPA Coral South, a Floating LNG project, whose export commenced at the end of 2022.

Please Come Back, Mozambique Begs TOTAL Again

Section: Gas Monetization · April 27, 2023 · No comments |

Filipe Nyusi’s keynote address at the Mozambique Mining & Energy Conference (MMEC), is the latest, clear indication that TOTALEnergies has not expressly determined it was going to move back to the site of construction of the 13Million Tonnes Per Year Liquefied Natural Gas project in the country.

The Mozambican President’s speech on Wednesday April 26, 2023, sought to convince the French Major and the international audience at the meet that it was safe for the company to restart its Cabo Delgado liquefied natural gas (LNG) project that was halted in 2021 following wide scale insurgent attacks on civilians.

“The working environment and security in northern Mozambique makes it possible for TOTAL to resume its activities any time,” Nyusi declared, referring to the 18 month old offensive by Mozambique and its partners, Rwanda and other Southern African countries, against the Islamic State backed insurgents, whose killing spree in the towns and villages close to the LNG site surged to a historic high in 2021, forcing TOTAL to declare a force majeure on the $20Billion project.

TOTALEnergies’ Chairman and Chief Executive Patrick Pouyanne visited Mozmbique in February 2023 to meet President Nyusi and review the security and humanitarian situation in Cabo Delgado, the northern province of Mozambique where the project is domiciled. The company announced the appointment of Jean-Christophe Rufin, said to be an expert in humanitarian action and human rights, to independently assess the situation in Cabo Delgado province.

Since that visit, however, media speculations had tended towards suggesting a likely return of TOTAL and its contractors to the site sometime in 2023. A March 2023 report quoting Saipem, the Italian contractor, as saying it had “agreed to restart a liquefied natural gas (LNG) project in Mozambique for TOTALEnergies in July 2023, was the biggest fuel in the speculation. “We expect to gradually restart the (Mozambique) project, according to the information received by our clients, starting from July this year,” Saipem CEO Alessandro Puliti said during a call on the group’s results for 2022.

TOTALEnergies itself never publicly gave any specific schedule of return.

Mozambique’s defence forces and their partners have since made inroads against the enemy since the April 2021 insurgent attack that “chased” TOTAL out of the project’s perimeter. The troops have taken back strategic roads and pushed the insurgents out of most of their bases, reportedly killing hundreds of fighters, according to International Crisis Group, a civil society organization with detailed monitoring scans on the challenges. “But despite being weakened, and seemingly no longer able to conduct complex and high-profile attacks al-Shabab (the terror group) adapted quickly, breaking up into small cells, the militants spread out across a larger area, raiding villages and security posts. Sixteen of Cabo Delgado’s seventeen districts suffered attacks in 2022”, the Crisis Group details in a comprehensive report in January 2023. “Insurgents also appear to be making occasional incursions into neighbouring Niassa and Nampula provinces and across the border with Tanzania and have also received their own boost from outside, as the Islamic State leadership named al-Shabab as one of its provinces, and more systematically began claiming the latter’s activities as its own”.

Mozambique is keen on taking advantage of the current high prices of LNG and the global shift towards cleaner sources of energy.

First Batch of Made in Algeria Gas Turbines Delivered to Iraq

Section: Gas Monetization · April 22, 2023 · No comments |

Iraq has received the first shipment of gas and steam turbines made in Algeria by Geat complex, a partnership of Algerian state hydrocarbon firm Sonelgaz and the global engineering firm General Electric.

The invoice for the turbines approximately $112Mllion.

The complex is preparing to export shipments of other similar gas turbines and is negotiating with a group of potential customers, mainly in several African countries, to supply them with this type of equipment.

Shell Expects Massive Reduction in Egyptian Gas Output

Section: Gas Monetization · April 8, 2023 · No comments |

Shell Plc is expecting a shortfall of 491Billion standard cubic feet of gas from what it planned to produce in Egypt between 2023 and 2025.

This is 85% of the company’s promised gas delivery to Egypt’s National Gas Grid for the period.

The shortfall is mainly caused by the performance of the West Delta Deep Marine fields being insufficient to meet the committed quantities to ELNG, the facility that ships natural gas from Egypt to Europe.

Egypt has been keen on increased gas output, both to satiate its domestic appetite and to supply Europe’s needs. Shell, it seems with these figures, wouldn’t be able to help much with that.

If the government diverts more gas to the domestic market, this would increase the shortfall to ELNG.

Time to Break the Deadlock on TOTAL’s Offshore South African Gas Deal

Section: Gas Monetization · March 31, 2023 · No comments |

By NJ Ayuk

TOTALEnergies has been trying to negotiate a deal that would involve pumping production from Luiperd through a 109-kilometre, 18-inch pipeline to the FA platform…

South Africa is a regional heavyweight. Its economy is one of the largest on the African continent — as well as the most diversified, the most industrialized, and the most technologically advanced. It has more extensive road and rail networks than any other African state, a feature that puts it in a good position for future growth.

But South Africa also has a very big problem. Since 2007, the national power provider Eskom has not been able to produce enough electricity to cover domestic demand — and the ever-widening gaps between supply and demand have given rise to a steady deterioration in power supplies and citizens’ quality of life. They’ve made blackouts commonplace, and they led President Cyril Ramaphosa to take the unprecedented step of declaring a “national disaster” in February.

I’d like to say that South Africa has reason to look forward to relief within the next few years — that the country has laid a foundation for using its own natural resources to resolve its energy shortages and can expect conditions to improve over time. Unfortunately, it would be premature to make such a statement.

Here are some of the reasons why.

Coal, Carbon, and Gas

As detailed in “The State of South African Energy,” (https://apo-opa.info/42oP0Ra) a new report prepared jointly by the African Energy Chamber, the country’s electricity shortages stem in large part from problems with Eskom’s coal-fueled thermal power plants (TPPs). These stations have long served as the backbone of South Africa’s power sector, but Eskom has failed to manage, maintain, and expand them adequately. Unfortunately, the results of its failure are glaringly evident in the form of load-shedding and increased reliance on diesel generators.

In the meantime, there’s another complication at hand, in that South Africa’s government has pledged to reduce the power sector’s carbon emissions intensity. That pledge hampers the country’s ability to compensate for Eskom’s previous failures by building more coal-burning TPPs or expanding existing facilities (steps the chamber believes are necessary to resolve the crisis). That means the country must find lower-carbon energy options.

One obvious lower-carbon energy source is a pair of massive natural gas fields that TOTALEnergies has found offshore in Block 11B/12B, a license area in the Outeniqua basin. According to documents the French major has submitted to South African authorities in the hope of securing environmental authorization for development, the two fields may hold as much as 4.5Trillion cubic feet of gas in recoverable resources. Luiperd, the larger of the two sites, appears to contain around 3Tcf (85 bcm) of gas, while Brulpadda field appears to contain another 1.5Tcf.

TOTALEnergies has been trying to negotiate a deal that would involve pumping production from Luiperd through a 109-kilometre, 18-inch pipeline to the FA platform, an existing offshore facility at state-controlled PetroSA’s Block 9. At the FA platform, the gas could then be transferred to existing infrastructure for delivery to customers on South Africa’s southern coast. Likely buyers would include PetroSA, which needs feedstock for its idle Mossel Bay gas-to-liquids (GTL) plant, and Eskom, which needs fuel for gas-burning TPPs.

Theoretically speaking, this deal makes a tremendous amount of sense for South Africa. The country needs a relatively low-carbon way to generate more electricity, and it just so happens to have a lot of gas available in fields off its southern coast. Shouldn’t it be rushing to develop these fields?

Bad Timing and Limited Patience

Practically speaking, though, South Africa hasn’t been in a rush at all. Instead, it has let the process play out for too long.

Last year, TOTALEnergies was upbeat, saying it was on track to wrap up a gas sales agreement (GSA) for Block 11B/12B in September 2022 — and that if it could do so, it would be in a position to start extracting gas from Luiperd in 2027. Since then, though, negotiations on the GSA have stalled out, largely because the state-owned companies involved in the process (PetroSA and Eskom) have been dragging their feet over questions related to pricing and financing.

In the meantime, load-shedding has only grown worse and worse, putting the country’s economic well-being and sparking civil unrest.

What’s more, TOTALEnergies has grown exasperated with the delays. As described in our report, it informed South African authorities in January 2023 that it was considering swapping the original plan to supply the domestic market for an alternative that would see future production exported via a floating liquefied natural gas (FLNG) vessel with a capacity of 3.4 million tons per year (tpy).

It’s easy to see how such an arrangement might benefit the French major and its partner, QatarEnergy. It would give the two companies a way to produce and deliver more LNG to markets in Europe and other regions where demand is high. However, the idea of fast-tracking a project in order to facilitate the export of gas from a country that’s running short of energy is so politically dicey that South Africa’s government is unlikely to approve it, which means that there may be even more delays ahead.

President Cyril Ramaphosa’s government can avoid that outcome, though, by taking the steps necessary to authorize TOTALEnergies’ original plan — that is, the one that aims to supply the domestic market — and make the FLNG option less attractive. This will involve taking practical steps such as providing guarantees for Eskom and PetroSA as they sign the GSA, since neither state-controlled company is in a solid financial position. But it will also involve summoning the political will to break the deadlock.

Ayuk, a lawyer and author, is the President of the African Energy Chamber

Kinetiko and Renergen: How Domestic Gas Production can help Mitigate South Africa’s Energy Crisis

Section: Gas Monetization · March 21, 2023 · No comments |

By NJ Ayuk

The country’s fuel and energy sector is truly in trouble, with power shortages and blackouts worse than ever before

South Africa is facing an energy crisis on a very large scale. It’s not for nothing that President Cyril Ramaphosa took the unprecedented step of declaring a “national disaster” in February. The country’s fuel and energy sector is truly in trouble, with power shortages and blackouts worse than ever before.

There are some hopes for relief, including efforts to find new sources of fuel for thermal power plants (TPPs).

On the one hand, South Africa possesses large offshore natural gas reserves in the Outeniqua basin and may be able to find more in its section of the Orange basin and elsewhere. On the other hand, it shares borders with other two future gas producers – Namibia and Mozambique, both of which have sizeable reserves and smaller populations than South Africa – that may be willing to export some of their bounty under the right conditions.

Nevertheless, these solutions are still some distance away, given that it will take years to bring gas from these large-scale projects to market.

In the meantime, South Africa should not lose sight of the fact that it has other solutions at hand.

It is true that the solutions I’m talking about are considerably smaller in scale and humbler in nature than the massive projects I’ve already mentioned. They don’t target massive reservoirs in deepwater frontier basins, and they won’t deliver hundreds of thousands of barrels of oil equivalent per day through multi-billion-dollar investments. But they do have the potential to offer crucial support to Africa’s second-largest economy at a time of severe crisis.

I know of two companies that are in a position to offer this kind of support. Nevertheless, these solutions are still some distance away, given that it will take years to bring gas from these large-scale projects to market.

In the meantime, South Africa should not lose sight of the fact that it has other solutions at hand.

Kinetiko Energy: Onshore Gas Supplies to Local Power Stations

One of them is Kinetiko Energy, an Australian company that is working to develop conventional gas reserves in southern Africa. Its primary focus is the Amersfoort-to-Volksrustregion, which focuses on a large gas deposit in the Mpumalanga province, southeast of Johannesburg. Kinetiko is still working to determine exactly how much gas its licenses contain, but it is optimistic in light of the fact that the area has long been known to hold very high-quality methane in shallow sediments and coal-beds, and it has estimated its 2C resource at 4.9Trillion cubic feet.

On January 30, 2023, the company issued a statement extolling the “record breaking” results achieved from a new core well, 271-23C, during logging and core-sample testing after the completion of a three-well drilling program. The statement included some insights into the well’s geology, but it also quoted Kinetiko CEO Nick de Blocq as saying that 271-23C was in a favorable geographic location. Specifically, he drew attention to the well’s position in Block ER271, close enough to the Majuba TPP to represent a field which could supply it with gas in addition to coal, its usual fuel.

Meanwhile, de Blocq also drew attention to 270-03C and 270-06C, the other wells drilled during the three-well drilling campaign. He pointed out that the Lily Pipeline runs through all of Kinetiko’s current blocks, including Block ER270. This is South Africa’s largest gas conduit, which transports (primarily Mozambican) gas from Sasol’s Secunda plant to coastal cities and to industrial consumers in the KwaZulu Natal region. “The proximate location of our southernmost boreholes in ER270 to the steel-smelting and manufacturing centre of Newcastle could mean a simplified logistical solution to get the gas to an increasingly hungry thermal industry market,” he stated.

Of course, it is true that Kinetiko is still working to finalize its plans. It has yet to determine exactly when it can begin commercial production, having started the activities required to evolve their Exploration Right into a Production Right, and it is busy negotiating with midstream players who bring downstream offtakers and financing. But it is optimistic about its ability to launch small-scale development quickly — and about its ability to make a local power-generating entity one of its very first clients. This is the sort of initiative and drive that has the potential to benefit South Africans greatly on a local level while larger-scale solutions come together, and I hope to see more of it.

INDEED, IF SOUTH AFRICA WAS WILLING to take steps to open up more of the onshore basins that might hold gas — such as the Karoo basin— it would be giving investors a signal that it was ready to entertain new solutions to a problem that has persisted for far too long.

Of course, when I call for new solutions, I don’t mean it’s time to give free rein to polluters and forget about environmental concerns entirely. If South Africa is going to develop an onshore gas industry, the government ought to be making plans to develop the regulatory regime accordingly, and investors ought to be keeping environmental concerns front and center as well.

But there’s good news: Some of them are already doing so.

(2) Renergen: Demand for Gas Beyond Power Generation

And that brings me to my second example: Renergen, the native South African company that is carrying out the Virginia gas project.

Renergen has been working to develop three conventional gas fields in Free State – Theunissen, Virginia, and Welkom, which are collectively estimated to hold nearly 407Billion cubic feet of conventional natural gas in proved and probable (2P) reserves. It is keen to monetize these fields because they contain relatively high levels of helium — a commodity that is both valuable and rare — as well as gas. As such, it has worked to transform its initial compressed natural gas (CNG) initiative into a larger-scale and considerably more ambitious liquefied natural gas (LNG) project.

In September of last year, Renergen started up its onshore gas liquefaction plant, becoming South Africa’s very first producer of LNG. The company touted its environmental credentials in a Twitter post announcing the launch, noting that the plant’s output would help reduce the country’s carbon footprint by making a new type of fuel with lower emissions intensity than diesel available for trucking and other commercial uses. It was referring to a deal signed in the summer of 2020 with Total South Africa, a subsidiary of the French major TOTALEnergies on joint marketing and distribution of LNG. Under that deal, Renergen agreed to deliver some of the LNG from the first phase of its plant to Total-branded filling stations along the N3 road, a major highway connecting Durban and Johannesburg, for sale as a long-haul trucking fuel. It also pledged to make more LNG available for distribution and sale via Total stations along other key highways once the second phase of its plant came online, saying that expanding the use of LNG in the road freight sector would help curb the rise in carbon emissions.

But Renergen has not confined its efforts to transport. It has also targeted industrial customers, and in August 2021 it signed a five-year supply agreement with Ardagh Glass Packing (previously known as Consol Glass), a supplier of glass packaging materials based in Johannesburg. Then in February 2022, it followed that with another five-year deal — this time, with Ceramic Industries Group, based in Vereeniging. Both Ardagh and Ceramic Industries are subsidiaries of Italtile, based in Cape Town; Ardagh has said it intends to use the LNG to replace liquid petroleum gas (LPG) at its Belville operation in the Western Cape area, while Ceramic Industries will use LNG to supplement the gas supplies it receives via pipeline. Renergen made its very first shipment of LNG to Ardagh’s Belville site in December 2022 after setting up turn-key delivery facilities per the terms of its contract.

At that time, the company said it had received expressions of interest in its LNG from multiple South African businesses, including independent power producers (IPPs), large-scale industrial manufacturers, and heavy logistics operators. It did not name any potential new clients, and since then, its efforts to drum up new business may have been overshadowed by the escalating energy crisis.

Nevertheless, Renergen’s efforts to establish a foothold in the industrial and transport sectors are important. They demonstrate that there is ample room for natural gas in South Africa – that there are opportunities for gasification in the country that are not confined to the power-generating sector.

Yes, South Africa urgently needs gas to help resolve its energy emergency. Gas will help South Africa find ways to produce the additional electricity it needs to provide all of its citizens with reliable and secure power — both in the longer run as new offshore fields come online and in the shorter term as companies such as Kinetiko and Renergen develop onshore resources.

But South Africa could also use gas for other purposes. It could use gas as a substitute for diesel in long-haul trucking — and thereby reduce emissions in the transport sector. It could introduce LNG as a fuel for industrial customers — and thereby reduce emissions in that part of the economy, while also reducing the drain on the national transmission grid. It could create markets that can be sustained and made profitable even beyond the time when (I hope) the current crisis will be nothing but a memory.

Let us give South Africa’s smaller-scale gas producers a chance to grow.

NJ Ayuk is the Executive Chairman of the African Energy Chamber (www.EnergyChamber.org) and Author of “A Just Transition: Making Energy Poverty History with an Energy Mix”.

Chariot Envisages 105MMscf/d for a Start in Moroccan Project

Section: Gas Monetization · March 10, 2023 · No comments |

UK listed junior Chariot has requested Engineering, Procurement and Construction (EPC) commercial proposals after completing the Front-End Engineering and Design (FEED) on the key components of its Anchois gas development project, offshore Morocco.

The FEED, the company says, confirms the individual components of the initial development, which includes:

Three initial subsea producer wells, including the Anchois-2 well drilled by Chariot in 2022, with multi zone completions to enable gas recovery across multiple stacked sands;

Subsea infrastructure (SURF and SPS) capable of delivering produced hydrocarbons from the wells to the onshore facilities via a subsea flowline and controlling the wells via an umbilical, with future expansion capabilities to tie-back additional wells;
Onshore central processing facility (CPF) to process the hydrocarbons and to deliver treated gas and condensate to market, with an initial capacity of one hundred and five million standard cubic feet of gas er day (105MMscf/d); and
Onshore gas pipeline to deliver the gas to the anchor gas offtakers via the Maghreb Europe Gas Pipeline (GME), for which a tie-in agreement has already been signed.

The Anchois gas field is located within the Lixus Offshore licence area in which Chariot holds a 75% interest and operatorship, alongside ONHYM which holds a 25% interest.

The FEED was initiated in June 2022, in conjunction with the subsurface development studies, this work

Chariot says that other technical work has been progressing in parallel with the FEED, in the lead up to development sanction, including:

Environmental, Social Impact Assessment (ESIA), for which onshore and offshore environmental baseline surveys (EBS) have already been conducted;
Field Development Plan (“FDP”) is being finalised by the Lixus joint venture partnership to enable the award of the production concession;
Development drilling planning is ongoing which can further evaluate the potential of an additional 754 Bcf of 2U prospective gas resources for minimal additional cost. The targets identified have an independently assessed geological chance of success (“Pg”) ranging from 49-61%.

Mozambique’s LNG Projects: Becoming a Reality?

Section: Gas Monetization · March 7, 2023 · No comments |

An Opinion piece, By Gerard Kreeft

On 23 November 2022, the President of Mozambique, Filipe Jacinto Nyusi, visited and inaugurated the Coral-Sul Floating Liquefied Natural Gas FLNG facility. The event was attended by Carlos Zacarias, the country’s Minister of Mineral Resources and Energy and other government representatives. ENI’s delegation at the commissioning was led by Guido Brusco, Chief Operating Officer Natural Resources. The event took place after the shipment of the first LNG cargo on 13 November from Coral Sul FLNG.

The inauguration of ENI operated Coral Sul FLNG project in Area 4 acreage offshore Mozambique deserves special attention. This focus is due at a time when the two of the country’s most highly touted LNG projects—Rovuma and Mozambique LNG– continue to be on security hold.

While LNG markets throughout 2022 and most likely in 2023 are scrambling to meet European and global gas demands, there has been radio silence on two of Africa’s most touted LNG projects located in Mozambique: Rovuma owned by a consortium consisting of ExxonMobil, ENI, China National Petroleum Company, Galp, Kogas and ENH; and Mozambique LNG owned by TOTALEnergies, Mitsui Group, ENH, ONGC, Bharat Petroleum, PTTEP, and Oil India.

Because of the security situation in the north of Cabo Delgado province, both projects have been at a standstill since 2021. In February 2023 TOTALEnergies sent an independent mission to Mozambique to evaluate the security status. The key question: will both TOTALEnergies and ExxonMobil resume their potential projects in the short-term?

Security clearance aside, a number of hurdles remain.

The TOTALEnergies project took Final Investment Decision in 2019. The ExxonMobil led project withheld its FID and has not taken that decision. Even if TOTAL returns to the project in 2023-2024 the earliest delivery of LNG would be 2027-2028, based on past project planning scenarios. We have no idea when ExxonMobil will take FID. What we know is that the LNG global marketplace is shifting and could provide the Mozambique project planners some additional headaches.

LNG’s Present Situation

In its recent Global LNG Outlook 20230-2027, the Institute for Energy Economics and Financial Analysis (IEEFA) provides a somewhat sobering picture for new LNG projects. The institute “expects that sustained high global LNG prices; weak LNG demand growth and elevated price sensitivity in Asia; declines in gas consumption in Europe; and a multi-year string of global capital investments in cost-competitive energy alternatives will undermine global LNG demand growth over the next several years.”

According to IEEFA the global demand for LNG is slowing:

Europe, although maintaining a high degree of importing LNG is also increasing energy efficiency measures and wind and solar projects have become commonplace;

Japan and Korea, historically dependable LNG importers, are increasingly turning to nuclear, and renewables;

China decreased its LNG imports by 20% in 2022 and is turning to pipeline gas supplied by Russia as well as domestic gas supplies;

South Asia, including India, Pakistan, and Bangladesh slashed purchases by 16% in 2022 and suppliers often defaulted on contracts to obtain higher prices elsewhere.

“After several years of weak supply growth, IEEFA anticipates that the global LNG market will see a tidal wave of new projects come online starting in mid-2025. The wave will likely crest in 2026, with the addition of 64Million metric tonnes of annual (64MMTPA) liquefaction capacity—the most in the history of the global LNG industry. The supply additions will boost global liquefaction capacity by roughly 13% in a single year. Liquefaction projects targeting in-service after 2026 may be entering a much smaller demand pool than bullish market forecasts anticipate. As new supply floods the market, today’s tight markets may give way to a supply glut, with lower-than-anticipated prices, smaller netbacks, tighter margins, and lower profits for LNG exporters.”

According to IEEFA’s forecast in 2023 only 5.8MMTPA of liquefaction production will be developed, and in 2024 9.1MMTPA. Total LNG production capacity is currently 456MMTPA.

The turning point will be 2025.

“IEEFA anticipates that roughly 17MMTPA of liquefaction projects are likely to come online around the world in 2025—more than in 2023 and 2024 combined. New capacity additions will crest in 2026, with an estimated 64MMTPA of capacity coming online in a single year, and continue into 2027, when 37MMTPA of new capacity is expected to begin operating”.…

Much of the new production will come from Qatar, USA and Australia. If 2026 and 2027 will see a sharp upturn in LNG liquefaction production, how will this affect Mozambique’s two LNG projects which could potentially add 38.1MMTPA when fully functioning? Long term delays can only threaten project viability. And not proceeding sooner rather than later increases the chances of these projects being listed as stranded assets.

A more immediate threat is that of ENI’s Coral South project already in operation. BP has contracted the entire output of Coral Sul for 20 years, having signed a free on board (FOB) contract with the project partners. In July 2022, it was reported that ENI was considering the possibility of deploying a second floating liquefied natural gas vessel in Mozambique. What does this mean for Rovuma and Mozambique LNG?

The Players and their Strategies

ENI, ExxonMobil and TOTALEnergies have varying strategies. So, how they will potentially address their Mozambique LNG projects?

A key ENI strategy is developing a series of joint-ventures to ensure that ENI can achieve maximum leverage for its current oil and gas assets and at the same pursuing new strategies as part of its energy transition plan. A key example is Azule Energy, Angola, a 50-50 joint venture between ENI and BP formed in 2022 to include both companies’ upstream assets, LNG and solar business. Azule Energy is now Angola’s largest independent equity producer of oil and gas, holding 2Billion barrels equivalent of net resources and growing to about 250,000 barrels equivalent per day (BOEPD) of equity oil and gas production over the next 5 years. It holds stakes in 16 licences (of which 6 are exploration blocks) and a participation in Angola LNG JV. The company also participates in the New Gas Consortium(NGC), the first non-associated gas project in the country.

TOTALEnergies is currently testing the waters: in February 2023 Patrick Pouyanné, Chairman and CEO of TOTALEnergies, visited the Cabo Delgado province of Mozambique to review the security and humanitarian situation and evaluate the actions taken by Mozambique LNG.

ExxonMobil has in the past followed the security precedents of TOTALEnergies and will no doubt do this again. That ExxonMobil is a partner in the Coral South project could strengthen its bargaining hand.

That LNG plays a pivotal role in the energy transition for both ExxonMobil and TOTALEnergies is beyond dispute.

ENI’s pole position that the company has with its Coral South project cannot be underestimated. And with Rovuma and Mozambique LNG scheduled to come on stream possibly in 2027, with a weakened global demand for LNG, both ExxonMobil and TOTALEnergies may have to go cap-in-hand to ENI to discuss possible project options. Finally, do not forget that the Government of Mozambique will seek an orderly development of its LNG resources. Certainly, a story of musical chairs in the make.

Gerard Kreeft, BA (Calvin University, Grand Rapids, USA) and MA (Carleton University, Ottawa, Canada), Energy Transition Adviser, was founder and owner of EnergyWise. He has managed and implemented energy conferences, seminars and university master classes in Alaska, Angola, Brazil, Canada, India, Libya, Kazakhstan, Russia and throughout Europe. Kreeft has Dutch and Canadian citizenship and resides in the Netherlands. He writes on a regular basis for Africa Oil + Gas Report and is a guest contributor to IEEFA(Institute for Energy Economics and Financial Analysis) based in Cleveland, Ohio, USA. His book ‘The 10 Commandments of the Energy Transition ‘is on sale at https://books.friesenpress.com/store/title/119734000211674846/Gerard-Kreeft-The-10-Commandments-of-the-Energy-Transition

BP Takes a Stab at Second Phase of GTA LNG Project

Section: Gas Monetization · March 5, 2023 · No comments |

bp and partners have confirmed the development concept for the second phase of the bp-operated Greater Tortue Ahmeyim (GTA) liquefied natural gas (LNG) project that they will take forward to the next stage of evaluation.

The partnership – composed of bp, PETROSEN, Société Mauritanienne des Hydrocarbures (SMH) and Kosmos Energy – will evaluate a gravity-based structure (GBS) as the basis for the GTA Phase 2 expansion project (GTA2) with total capacity of between 2.5-3.0Million Tonnes per Annum.

GBS LNG developments have a static connection to the seabed with the structure providing LNG storage and a foundation for liquefication facilities.

The concept design will also include new wells and subsea equipment, integrating with and expanding on existing GTA infrastructure. The partnership will consider powering LNG liquefication using electricity to help drive operational emissions lower. bp and its partners are now working with contractors to progress the concept towards the pre-FEED stage.

GTA is located in water depth of 2,850metres, one of the deepest subsea developments in Africa. Phase 1 – currently under development – will export gas to an FPSO approximately 40kilometres offshore where the gas will be processed and liquids separated, before exporting gas onward to floating LNG facilities 10kilometres offshore. It is expected to produce around 2.3Million tonnes of LNG per year when operations commence.

In July 2021, the GTA project was granted the status of ‘National Project of Strategic Importance’ by the Presidents of Mauritania and Senegal. This recognition demonstrates the commitment of the host governments and the significance of the project to both countries.

bp and the two Governments already have a long-standing and wide-ranging cooperation encompassing the GTA project and other potential energy developments. In October 2022, bp announced the signature of an exploration and production sharing contract for the BirAllah gas resource in Mauritania. In addition, bp continues to work with partners on the development of a major gas-to-power project in Senegal, Yakaar Teranga.

Most recently, bp signed a memorandum of understanding (MoU) with the Government of Mauritania to deliver a programme exploring the potential for large-scale production of green hydrogen in the country.