Mozambique LNG – undoubtedly one of Africa’s most talked-about hydrocarbons projects is made up of the Golfinho-Atum gas field development (Area 1) in the deep-water Rovuma Basin and an onshore LNG facility on the Cabo Delgado coast.
In recent weeks, the project has garnered much media coverage – for both positive and negative reasons. In April, Mozambique LNG became the centre of the country’s COVID-19 outbreak, following the first diagnosis on April 1. The project currently remains in lockdown, however, a spokesperson recently said work is expected to resume soon.
Recently, Mozambique LNG again hit headlines when it was announced that the project had secured $15 billion of financing, with a signing scheduled in June. The group of about 20 banks involved in the lending includes Africa Oil Week participants Standard Bank Group and Société Generale, which is reportedly acting as the financial adviser. Notably, the U.S. Export-Import Bank has approved a $4.7 billion loan to back American suppliers for the project, which will reportedly sustain 16,700 American jobs.
So, given current global turbulence, what do the project’s potential outcomes look like? The answer is the same one we’ve been hearing echoed throughout the industry during this pandemic, the future is unclear.
First production on Mozambique LNG is still scheduled for 2024. However, at the end of last month, Upstream reported that well-placed sources had told the publication this date now looks unrealistic, given the project’s challenges related to COVID-19 and construction issues.
According to a Mozambican Finance Ministry forecast, the Area 1 LNG project will generate about $38 billion in revenue for the country’s government over its lifetime. However, with LNG prices in Asia and gas prices in Europe hitting record lows amid weakened demand, it is an uncertain time for gas. According to the International Energy Agency, global gas demand will decline this year for the first time in more than a decade. Meanwhile, the International Gas Union has said that low demand, and the 41.8m tonnes of new capacity already added last year, may prolong the glut into the mid-2020s. If only we had a crystal ball.
Having said this, natural gas is now widely accepted as the bridging fuel of choice which will drive the energy transition and steer us towards a lower-carbon future. With many gas projects in the U.S. recently being put on ice, the world is recognising Africa’s vast potential to become a key player in the global energy transition and Mozambique LNG may just prove to be at the centre of this.