Anadarko Sale 'No Hindrance to Mozambique LNG': Analyst

The implementation of Mozambique 1, a 12.88mn mt/yr LNG project, will go ahead speedily whichever – if either – of the two bidders for Anadarko's shares succeeds, an analyst told NGW. The paperwork is finalised and Anadarko is not the sole shareholder. Unpacking the terms of the deals agreed with contractors and customers would only cause costly delays. Anadarko has said it expects to take a final investment decision (FID) in the first half of this year.

Citing recent conference calls with investors, former investment banker Anish Kapadia told NGW that US major Chevron, bidding a mix of cash and shares for an overall enterprise value of $50bn, has said that the project is good to go as it stands and it does not want to reopen the contracts before the imminent FID.

If anything, Chevron's ownership of the project and its strong balance sheet would speed up subsequent phases, he said. And Occidental Petroleum, for whom the only real prize is Anadarko's Permian Basin production, would most likely sell the stake in the project if its higher-priced deal was accepted, he said, as LNG is beyond its own experience. If it did retain the stake though, that might slow down further phases. Its mix of cash and shares would value the new enterprise at $55bn.

Reopening contracts would be risky, Kapadia said, as that could delay final investment decision, and there is a finite appetite for financing LNG projects. According to some estimates, some $200bn will be required to build this year's expected project slate, and slipping down the queue would harm a project's chances of  securing the financing needed to take FID.

There are two LNG projects in Mozambique, the other one being subdivided into a floating (Coral LNG, 3.4mn mt/yr) and an onshore (Rovuma LNG, 15.2mn mt/yr) project, operated by Italian Eni and US major ExxonMobil. That project is running behind Anadarko's, but neither has yet announced financing. Kapadia said he expected the two projects to cost about $50bn, of which debt would be about $30bn.

Hanging over the financing costs is Mozambique's default on eurobonds, he said. But if Mozambique were able to restructure the debt then financing would cost a little less, and so more money would flow to the shareholders, including the government. If the plant were to start operating by 2025, then Mozambique would be in a position to repay those debts by 2030, he said, and if lenders can see the prospect of  repayment then they might be able to reach an amicable agreement and so lower the finance costs.