Age of discovery gives sleeping African giant reason to stir

The search for Mozambique's hydrocarbons began more than 100 years ago but it was only when oil prices began to rise steeply 20 years ago that exploration really picked up.

The search for Mozambique's hydrocarbons began more than 100 years ago but it was only when oil prices began to increase steeply 20 years ago that exploration really picked up.

Discoveries by Sasol, Anadarko and Eni over the past decade raised expectations of more big finds. As new finds have been uncovered, Mozambique's energy sector has attracted the attention of companies from Asian countries where there is rapidly rising demand for gas. Some companies have opted to buy into the exploration blocks at an early stage for this reason.

The reserves have been deemed sufficiently great to merit a major LNG export project. The operators of offshore areas one and two, which are located in Mozambique's Rovuma basin near the Tanzanian border, have agreed to cooperate on the project. Area one is controlled by the National Enterprise of Hydrocarbons (ENH), the US oil major Anadarko, Mitsui, Bharat PetroResources, Videocon and PTTEP from Thailand. The partners have stated there is up to 65 trillion cubic feet in estimated recoverable natural gas (and 100 trillion cubic feet of original gas in place) in their area. The US company Bechtel has been selected to carry out front-end engineering and design services for area one. Bids were submitted to construct the project in December.

The concession for block four is owned by Italy's Eni, Galp Energia, Kogas and ENH. ENI sold a 20 per cent stake to China National Petroleum Corporation in March. Eni announced discoveries totalling 80 trillion cubic feet of gas in place in April.

Mozambique's discoveries have drawn intense interest due to their size and the speed with which new ones have been made. The size of reserves per well has averaged about 7 trillion cubic feet per well, according to the UK's Oxford Energy.

The partners are yet to decide how the LNG collaboration will be funded. They are currently in talks with export credit agencies to secure some of the necessary investment.

Phase one of the LNG project will comprise four liquefaction trains each with a capacity of 5 million tonnes per year. The facility is scheduled to start shipping LNG in 2018. Most of the LNG is destined for Asia, where there is high demand for natural gas. The facility will be expanded in a second phase at a later date. Talks between the firms and the government are underway and the developers are keen to sign agreements with the state.

"One of the most important things we need is a legal framework to protect our investment," says one of the partners on the project, who wished to remain anonymous.

"Logistics is going to be the biggest issue [for the natural gas projects]," says Titos Munhequete of Golder Associates, which is advising Anadarko. "Access to that area is challenging. There is no port there. There's one nearby at Pemba, which is a smaller port and you can't bring in deep vessels."

The government has said project agreements will be signed this year, although this is likely to be delayed until early next year because of elections that could trigger a rotation of ministers, potentially slowing the finalisation of gas agreements.

"When elections happen, all important decisions are delayed," says a source close to the project.