Royal Dutch Shell has accused Anadarko Petroleum of holding it and the Mozambican government hostage by refusing to supply enough domestic gas in the first phase of a giant liquefied natural gas project.
Anadarko of the US and Eni of Italy have discovered about 150tn cubic feet (4.5tn cubic metres) of gas in deep waters off the coast of Mozambique and have made initial investments in parallel projects expected to cost up to $40bn in total to develop. Most of the gas in what is being called “Africa’s Qatar” will be pumped onshore to two LNG trains from where it will be exported to Asia and Europe.
As part of efforts to develop the local economy, Shell plans to build a 38,000-barrel-a-day gas-to-liquid plant that will produce kerosene, diesel and naphtha. But Moon Hussain, director of the project, said Anadarko was obstructing its plans by refusing to supply gas until the second phase of the LNG project, which is not expected to start until 2031.
“If we don’t get the gas for our fuels,” Mr Hussain told an FT Summit in Maputo last week, “the benefits of that get pushed out well beyond 2030 and the development of the local industries on the back of that gets pushed out beyond”. Anadarko, he said, was “holding everybody to hostage” and could easily certify more gas to supply Shell’s project.
Steve Wilson, Anadarko’s vice-president and Mozambique country manager, questioned the economics of the project, which he said had only a third of the capacity of Shell’s $19bn Pearl gas-to-liquid plant in Qatar. “I’m scratching my head, thinking this is a bloody fairy tale,” he said.
“We have to differentiate here between aspirations and reality,” he said of Shell’s wish to start its gas-to-liquids plant from 2025. “The fact of the matter is that in order to justify investment in an LNG project we need to have certifiable reserves.”
Mr Wilson added that the Anadarko-led consortium would eventually supply 400m cubic metres of gas domestically, but that it could spare only 100m cubic metres in the first phase, expected to begin around 2025. Lenders, he said, were unwilling to allow Anadarko to certify additional reserves until production began.
Shell said its project was not only commercially feasible but would also make a valuable contribution to Mozambique’s development.
Maputo central market. The government wants to develop local industry and improve power supply © AFP
In addition to earning royalties from gas exports, Maputo wants to develop local industry and improve power supply. Only about a quarter of 30m Mozambicans have access to electricity. There are additional plans for a $2bn gas fertiliser plant to be built by Norway’s Yara.
Augusto Fernando, deputy minister of mineral resources and energy, said Maputo was urging Anadarko to “try to speed up” supply. “The Mozambican government would like to get these programmes moving,” he said.
Florival Mucave, president of the local content commission at the Mozambican Confederation of Trade Associations, said a delay in domestic gas supply would deprive Mozambique of much benefit. “We would like to appeal to the international oil companies to look at an inclusive economy,” he said. “We expect them to work with Mozambicans and Mozambican companies to help the Mozambican economy.”
Maputo is trying to avoid the fate of countries such as Angola and Nigeria, where hydrocarbons have destroyed — rather than developed — large swaths of the economy. It has already made one mis-step, borrowing — and then defaulting — on more than $2bn of loans made on the back of anticipated gas receipts.
A consortium led by Anadarko is expected to give final investment approval to the LNG project in the first half of next year. Mr Wilson said the company had already started resettling families and had 3,000 workers on site.(FT)