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Exxon, ENI and CNPC in secret Yalta on Block 4

Over the past few months a flurry of toplevel meetings in Maputo and Beijing handed out roles between ExxonMobil, ENI and CNPC in developing the highly prolific Block 4. The one remaining question concerns funding the giant project and it still hangs in the balance.

What part for ExxonMobil? The visit was to have been discreet, but the arrival of Exxon CEO, Rex Tillerson, in Maputo in late July caught everyone’s attention due to the large number of bullet-proof cars travelling through the city en-route to the President’s residence. Tillerson was able to consult in private with President Filipe Nyusi as well as a third rather special person, the CEO of ENI, Claudio Descalzi. On the agenda was ExxonMobil’s exact role in Block 4 – where the FLNG (to be built by Technip, Samsung Heavy Industries and JGC) will be deployed.

Exxon – which won’t be releasing any information for several weeks – is expected to acquire 50% of ENI East Africa (EAA) that is currently 71% controlled by ENI and owns 70% of the precious block.

If confirmed, the acquisition will give Exxon 35% of the project. Another point that was discussed at the gathering concerned the unitised zone between Block 1 – operated by Anadarko – and Block 4, on which the giant reserves of Mamba and Prosperidade are situated.

Anadarko and ENI have agreed to jointly develop the reserves but it appears some details remain to be pinned down. Anadarko’s Vice-President for LNG, Mitch Ingram, was able to squeeze in a meeting with Mozambique’s President just after the conclave with the Italian and American oilmen on 19 July.

In buying into EAA, ExxonMobil isn’t expected to become operator of the Coral FLNG project but could take that position later on the Mamba and Prosperidade fields. These two reserves are to supply trains 3 and 4 of the future LNG terminal at Afungi.

Also a part of the Exxon and ENI programme is the Chinese major CNPC, which has owned 21% of the license – through its 30% holding in EAA – since 2013. According to our sources, the ENI

and Exxon chiefs flew directly from Mozambique to Beijing to confer with their counterpart at CNPC, Wang Yilin. The aim of the visit was to reach an agreement on the parts each company will play in developing Block 4’s gas.

How KOGAS and Galp fit into the picture, as far as Exxon is concerned vis-à-vis the development of the FLNG programme still raises some questions. Firstly, BP – which was theoretically supposed to buy all of the 3.4-million tons of liquefied gas products turned out each year – hasn’t yet formally signed the agreement. Another issue is that the two other partners of ENI and CNPC, namely South Korea’s KOGAS and Galp of Portugal, haven’t yet approved the development plan.

ENI has given them a deadline of 31 October to make up their minds. Through EAA, ENI could decide to buy out the stakes of the two companies, or 20% in all. But if it did, the estimated price tag of US$4-billion (based on the price CNPC paid in 2013 for 21% of the block, at US$4.3-billion) would need financial backing from ExxonMobil.

How can ENH pay? The last question concerns the 10% owned on Block 4 by the national oil company ENH. While exploration costs on the block are being carried by the private partners, ENH will have to put up cash for its 10% share in development expenditure. Mozambique is currently in hock to the tune of over 100% of its GDP. As a result, the cash calls on ENH will probably need to be met by ENI. Early on in talks, the Italians wanted to apply a 13% interest rate on loans but ENH’s boss, Omar Mithá, had that reduced to 9%.

Source: Africa Intelligence

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