By Toyin Akinosho
Ever since Anadarko encountered massive tanks of natural gas in the Rovuma basin, located in the Indian Ocean off Mozambique, the dirt poor African nation has been host to a binge of buying and selling.
The Windjammer discovery turned up five hundred and fifty five net feet of gas sands in February 2010. Then came Barquentine, which yielded 416 feet net gas sands (NGS) and Lagosta, with 550feet NGS, all in the same year.
These discoveries, in water depth of about 1,600 metres in Area 1, nailed the east African offshore firmly on the hydrocarbon map of the globe.
It didn’t take 20 months after the news of these encounters for the scramble for Mozambique to begin. And for seven long years since the first deal, the country has been put, repeatedly on sale, and bought, in pieces.
What I am talking about is not the routine licencing rounds of exploration acreages.
And it’s certainly not about the country, as a piece of real estate, being cut up by the authorities and sold to property developers, who then construct gated residences.
It’s about energy companies with first mover advantage, selling chunks of equity from their hydrocarbon assets, for a total of over $12Billion, even before a molecule of gas has been produced.
The first high profile sale happened in 2012, when a rank unknown, three year old company named Cove Energy, put itself on sale, regardless of its strong financial position. What was attractive about Cove was its 8.5% interest in Anadarko operated Area 1.
Between February and July 2012, the AngloDutch major Shell and the Thai national oil company PTTEP engaged in a fervent bidding war to acquire Cove. On February 21, 2012, Shell placed an indicative bid of £1.95 per share. Two days later, Cove received an indicative bid of £2.20 per share from PTTEP. On May 3, 2012, Shell offered £2.20 per share, which was countered twenty days after by PTTEP, with £2.40 per share. Shell promptly withdrew from the bidding. In August 2012, Cove was sold to PTTEP for £1.2Billion ($1.6Billion), which was £2.40 per share.
While the deal was one of the year’s most prominent public takeovers worldwide, the key beneficiaries were a handful of people. Michael Blaha, former country chairman of Shell in Algeria and John Craven, founder and former CEO of Petroceltic International, had teamed up in 2009 to create a new E&P company with a focus on the largely unexplored deep waters of East Africa and the Eastern Mediterranean. They joined the Board of Directors of Lapp Plats plc, a cash-shell listed on the Alternative Investment Market (AIM) of the London Stock Exchange and found a new name Cove Energy, for the company. Most of the $250Million that Cove Energy raised through four placings between June 2009 and November 2010, were used to acquire (1) the equity in Area 1, (2) 10% interest in Rovuma Onshore Block, onshore Mozambique, (3) a significant interest in the Mnazi Bay concession, offshore Tanzania, and (4) most crucially, to keep up with the cost allotment of Anadarko’s frenetic drilling campaign in Area 1.
It paid off.
Messrs Blaha and Craven cashed out of Mozambique and in November 2012 went to found another company, Discover Exploration Limited. They have not been able to re-enact the Mozambique magic, even with the Carlyle Group announcing it was backing the company with $200Million.
Did Mozambique itself, as a country, make any money out of the PTTEP takeover of Cove? I am getting ahead of myself.
The Italian player ENI had followed up Anadarko’s Area 1 discoveries with its own finds in Area 4, a separate acreage in the same Rovuma Basin. In October 2011, it made its first discovery, a giant gas field chrsitened Mamba South. It has gone ahead with its own string of discoveries and now claims as much as 85Trillion cubic feet of gas resources in place. That, in the view of some experts, could be as much as 45Trillion cubic feet estimated recoverable reserves (Reserves are more firm than resources).
ENI lost no time starting to make money from its discoveries, even while it laid down plans for developing the fields. In 2013, two years after it encountered Mamba South, ENI sold 20% of Area 4 to China National Petroleum Corp, for a whopping $4.2Billion. It was the Chinese behemoth’s first step into east Africa.
The same year, ONGC Videsh, the overseas arm of the Indian state hydrocarbon firm ONGC, bought 10% of Area 1 from Videocon Group for $2.475Billion.
In 2014, Anadarko sold 10% of Area 1 to ONGC Videsh for $2.64Billion. The American independent reported in its Annual report that it made a gain of $1.5Billion from the transaction.
In March 2017, ENI sold more slices of Mozambique again. For $2.8Billion, it signed a sale and purchase agreement with ExxonMobil for the latter’s acquisition of a 25% indirect interest in the Area 4 block. Following completion of the transaction, ENI East Africa is co-owned by ENI and ExxonMobil with a 35.7% stake and the remaining interest of 28.6% by CNPC.
Chevron has now agreed to buy the entire Anadarko shares, in part because of Mozambique. The American supermajor will be 26.5% holder of the Area 1 acreage and will operate the planned LNG projects.
But how does Mozambique itself fare?
A country that has to be helped with $200,000 donation by Anadarko, when its poverty was laid bare by the disaster wrought by the tropical cyclone Idal.
Hear this perspective from the head of ENH, the Mozambican state hydrocarcarbon company: “Since we (the country) became independent, (in June 1975), we’ve depended on inflows from donors”, says Omar Mitha.
As for ENH itself: “We are not an investment-grade investor”, Mr. Mitha says. “But if you bring the future dynamic into the picture, you see the country’s government will have a huge surplus in its accounts”.
Mozambique is waiting until the LNG projects are constructed, and the gas sold, before it can make anywhere close to a billion dollars, whereas its key partners have hurled out of the country, monies, collectively, in excess of $12Billion.
