China 'Major Buyer of LNG from Rovuma': Bank

A new study by South Africa’s Standard Bank (SB) says China will become the major buyer of the output from Mozambique’s Rovuma LNG project. SB is 20.1% owned by the Industrial and Commercial Bank of China, one of South Africa’s leading commercial banks, and has a growing presence in Africa.

The Rovuma study, by SB oil and gas expert Paul Eardley-Taylor, says that the development of Rovuma gas will be the largest project in Africa’s history.

“We envisage Rovuma LNG will take a final investment decision (FID) in mid-2019 and reach financial close in 2019," the report says.  The project will be a two-train, 15.2mn metric tons/yr, $27bn (low capex) - $32bn (high capex) project which will monetise 2.6bn ft³/day of Mozambique’s offshore resources and the bank expects the project to operate for 25 years when complete in the mid 2020s.

SB and Conningarth Economists have written an independent study of the macroeconomic impact of the project on the Mozambican economy (2018 GDP was $14bn) from LNG, domestic gas and condensate sales.The project includes the world’s first mega-trains outside Qatar, which shows the investors' confidence that gas flow will be constantly high, as it is in Qatar.

In 2017, Area 4 owners declared FID on the 3.4mn mt/yr Coral South floating LNG project, following the discovery of 150 - 200 trillion ft³ of  gas in the wider Rovuma Basin (across Areas 1 and 4), one of the world’s top ten largest recoverable gas reserves.

SB says a future debate will be whether the government of Mozambique should set up a sovereign wealth fund to diversify the Mozambican economy. SB considers Mozambique can become to China for LNG, what Australia is for its minerals and New Zealand is for its food. 

SB noted that any delays to exports would have a major impact upon Mozambique's economy. It said a one-year delay in the Rovuma Basin investment programme would cost it $1.6bn-$2.2bn in lost GDP.

All the output from Coral South LNG, operated by Italian Eni, has been sold to BP. The partners in Rovuma LNG agreed late last year to be responsible for marketing their own shares of the gas, which will save time finding buyers before taking FID but will weigh heavily on their balance sheets compared with the conventional project finance approach. 

Area 4 participants are ExxonMobil; Italian Eni, which will operate the upstream part; China National Petroleum Corporation (CNPC); state Empresa Nacional de Hidrocarbonetos (ENH); Korea's Kogas; and Portugal's Galp.