Upstream to Downstream: Mozambique’s Major Developments

In celebration of our recipient of AOP’s ‘Person of the Year Award’, H.E. President Felipe Nyusi, we are running content from the Africa Energy Series Report 2020: Mozambique, which highlights Mozambique’s gas revolution. H.E. Nyusi will receive the prestigious award at the Mozambique Gas & Power 2021 Conference & Exhibition.

Since initial exploratory drilling in 2007 by U.S. operator Anadarko, Mozambique has uncovered vast natural gas volumes within its offshore basins, and now carries the potential to be the fourth largest natural gas exporter globally. With discoveries ranging from Anadarko’s initial 480 feet of gas found in Area 1 in 2010, to Eni’s discovery of 425 billion cubic meters one year later, the onus now lies on major operators including Royal Dutch Shell, Total, Eni and more to develop the requisite infrastructure to exploit the reserves, generate exports and bring revenue into the country.

Potential inhibitors to the development of such resources include two ‘black swan’ events that have occurred since early-2020. In addition to the onset of COVID-19 in March including a specific outbreak on Total’s Mozambique LNG development – the gas-rich Cabo Delgado province is facing a growing Islamist insurgency that began in the country in 2017.

Nevertheless, the world-class nature of Mozambique’s gas assets has offset such inhibitors, and the country recently secured the largest foreign direct investment in Africa to date through its Mozambique LNG development. Gas monetization projects push forward on schedule, as the nation continues on its path to becoming a global energy giant.

World-Class Gas Assets

Mozambique’s offshore Area 1 and Area 4 blocks in the Rovuma basin are considered to be two of the most important offshore gas developments on the continent. Spearheaded by a consortium led by French multinational Total, Area 1 will see the construction of the 12.9-million tons per year Mozambique LNG plant located in Afungi, fed by the Prosperidade Complex and Golfinho-Atum Development. Production is expected to begin in 2024, producing two billion cubic feet of natural gas per day. Meanwhile, Area 4 is being developed by ExxonMobil and partners, and will see the construction of the 15.2-million tons per year Rovuma LNG plant. The plant will be fed by the Mamba Complex and Coral Field discovery, the latter of which will use a floating liquefied natural gas (FLNG) vessel – the first FLNG project in Africa – to exploit the gas reserves of the block.

While Exxon has delayed FID on the project due to COVID-19, start-up of the plant is still projected for 2022, at a production level of approximately 15-16 million tons per year. The construction of the FLNG vessel to service the Coral Gas field is being led by Italian multinational Eni.

On a smaller scale, South African integrated energy and chemical company Sasol is seeking to expand gas processing facilities at its Pande-Temane gas fields, which have a proven reserve capacity of 2.6 trillion cubic feet. The majority of gas produced from the field is currently exported to South Africa through an 865 km pipeline, with only a small remainder directed for domestic use. The scope of the expansion project includes the drilling of five additional wells and the construction of a fifth train at the Central Processing Facility, with a capacity of 150 million cubic feet of gas per day. Sasol is also further developing the Greenfield Inhassoro oil discovery – Mozambique’s first commercial oil discovery – which is expected to produce up to 2,000 barrels per day upon start-up.

Midstream Infrastructure for Electricity Generation

Given Mozambique’s rich energy resources and neighboring South Africa’s lack of a reliable, affordable energy supply, the planned Mozambique (Cabo Delgado) to South Africa (Richard’s Bay) Gas Pipeline will supply natural gas from the Rovuma Basin to South Africa. Spanning 2,450 km, the project is still in its early stage of planning and aims to supply gas-to-power markets in South Africa, a country that largely depends on coal-fired power stations otherwise.

Led by Mitsui OSK Lines and Karpower International, Nacala LNG-to-Powership is another power project underway and represents Mozambique’s first LNG-to-Powership development. The project involves the construction and operation of a Floating Storage Regasification Unit (FSRU), which will deliver regasified LNG to a powership, where it will then convert the LNG into electricity to power the national grid. The powership will be connected to the grid through a transmission and distribution facility operated by state-owned utility Electricidade de Mocambique.

While the powership is already in operation, it is heavily reliant on fuel oil, and the installation of the FSRU will enable the use of a cleaner, lower-carbon energy source. The project is anticipated to begin in 2021, in which it would be the first LNG-to power solution and FSRU project in Eastern and Southern Africa.

Downstream Developments

Mozambique is heavily reliant on oil, gas and petroleum derivative imports due to a lack of domestic refining capacity. As a result, the country is constructing its first refinery, to be fed by crude supplies from the Rovuma and Mozambique Basins. State-owned Empresa Nacional de Hidrocarbonetos (ENH) is currently conducting a feasibility study to establish the location, design, timeframe and capital investment needed for the construction of the refinery.

The Afungi Gas to Liquids (GTL) project serves as another downstream development that will enhance Mozambique’s ability to generate energy exports to regional and global players. Led by supermajor Shell, the project plans to extract natural gas from the Rovuma basin to produce 38,000 barrels per day of liquid fuels, including GTL, diesel, naphtha and kerosene, along with 50MW to 80MW of electricity. Shell is targeting a final investment decision in 2021, with a four-year construction period.