ENI close to ordering US$5.4 billion FLNG vessel for Rovuma basin, Mozambique


The Italian hydrocarbon company ENI is close to awarding the contract for the construction of the floating liquefied natural gas (FLNG) vessel which will supply the world’s markets with gas from Offshore Area Four in the Rovuma basin off the northern coast of Mozambique.

ENI is the operator of Offshore Area Four, which is estimated to contain 85 trillion cubic feet of gas.

According to the South Korean news agency Yonhap, a consortium composed of the French company Technip, JGC (formerly known as the Japan Gasoline Company) and South Korea’s Samsung Heavy Industries is likely to get the contract which is valued at 5.4 billion US dollars.

Yonhap reported that Samsung Heavy Industries has almost secured a 2.5 billion dollar deal for its part in the construction of the plant. It quoted an unnamed source as stating “it’s safe to say that Samsung Heavy has virtually won the contract. It will be signed around October”.

The FLNG vessel will be located over the Coral gas field and liquefy 3.4 million tonnes of natural gas per annum. It is estimated that Coral holds 16 trillion cubic feet of gas, enough to supply a further FLNG if the market conditions are suitable.

In February, the Mozambican government gave the go-ahead for the project, and the Environmental Licence has already been awarded. It now looks certain that ENI will make its final investment decision on the Coral field later this year.

ENI has also discovered gas in the Mamba field which straddles Area Four and neighbouring Area One (operated by the US company Anadarko). In December, the two companies entered into a unitization agreement for the use of this gas, which will be processed onshore, on the Afungi Peninsula in Palma district. ENI is expected to make its final investment decision on its Mamba field next year.

However, the news agency Bloomberg reported at the end of June that the US hydrocarbon giant Exxon Mobil and Qatar Petroleum are looking at acquiring a stake in the natural gas fields in the Rovuma. The rumours are that they are seeking to buy a major stake in both Area One and Area Four. Nevertheless, it is thought that ENI will keep its stake in Coral.

A deal such as this would offer a tremendous boost to the Mozambican government, which is in financial difficulties due to a fall in commodity prices, large sovereign debts, and a severe drought. Bloomberg quoted a source as stating that acquiring a share of Anadarko’s Area One could generate capital gains tax of about 1.3 billion dollars for the government. Purchasing a stake in ENI’s Area Four would raise further revenue.

Previously, some commentators had stated that if Exxon became the operator in the two offshore areas, there would be additional benefits from reduced costs and more control over the entire production. In addition, Exxon has an AA+ credit rating and easy access to the huge amount of credit needed to develop the projects. However, others have argued that such a takeover would involve an inevitable delay the both LNG projects.

ENI controls a 50 per cent indirect interest in Offshore Area Four owned through ENI-East Africa, which holds 70 per cent of the concession. The other 20 per cent held via ENI-East Africa belongs to the Chinese company CNPC. The other three partners, with ten per cent each, are Kogas of Korea, Galp Energia of Portugal, and Mozambique’s National Hydrocarbon Company, ENH.

Source: AIM

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