Competition in world LNG markets is about to get a lot more exciting with the signing of a heads of agreement (HOA) between Anadarko Petroleum Corp. and Eni for the development of 100 Tcf to 175 Tcf of natural gas reserves offshore Mozambique. The initial development will include four LNG trains, each with a capacity of 5 million metric tons per year (MMmt/y), with first delivery of LNG set for 2018.

The addition of 20 MMmt/y of LNG would roil world markets even more with increased competition for customers. Development of these huge East African reserves could have an impact on proposed LNG projects in Australia, Canada and the US. If nothing else, the additional LNG could lead to a buyer’s market, resulting in lower LNG prices.

Given that customers such as Korea Gas Corp. (KOGAS) and PTT Exploration and Production Public Co. Ltd. (PTTEP) are participating in the project, there would be an expectation of getting a good deal on LNG supplies.

The HOA is among the first steps in facilitating development of offshore Area 1, operated by Anadarko, and Area 4, operated by Eni along with common onshore LNG liquefaction facilities in the Cabo Delgado province of northern Mozambique. A final investment decision is expected in 2013.

“Reaching an HOA with Eni is a significant step that preserves the project timeline,” said Anadarko President and CEO Al Walker. “We expect the HOA to lead to a unitization agreement to further facilitate the efficient development of the common resources, as well as the independent reservoirs on both blocks, enabling enhanced economies of scale through shared infrastructure and facilities.”

Anadarko FEED Contracts

Multiple FEED contracts were awarded for both the offshore and onshore portions of the development. All FEED contracts are subject to final contract execution. “Awarding FEED is an important event for Mozambique, as it marks a significant milestone in the development cycle of this project,” Walker continued.

For the offshore installation, FEED contracts will be performed by three parties: Technip USA Inc.; a joint venture between Subsea 7 (US) LLC and Saipem SA; and a joint venture comprised of McDermott Inc. and Allseas USA Inc. These will be effective immediately following contract finalization and will consist of a full engineering, procurement, installation, and commissioning plan for the subsea production systems for the Prosperidade complex, according to Anadarko.

The onshore FEED contracts for the LNG plant will be performed by: a joint venture of JGC Corp. and Fluor Transworld Services Inc.; a joint venture of an affiliated company of CB&I and Chiyoda Corp.; and International Bechtel Co. Ltd.

For onshore, an overall LNG park plan will be developed that will include the capacity to produce approximately 50 MMmt/y of LNG in future years. Each of the LNG FEEDs will deliver designs for an initial development consisting of four liquefaction trains with capacity of 5 MMmt/y per train. Full engineering, procurement and construction plans, and a lump-sum turnkey price for the initial two trains will be developed along with specifics for the second two trains, stated Anadarko.

Once all of the above designs and estimated costs are submitted, a LNG contractor and an offshore contractor will be selected and awarded contracts for engineering, procurement, construction, installation and commissioning (EPCIC), added PTTEP.

Tevin Vongvanich, president and CEO, PTTEP said, “Awarding of multiple FEED contracts and reaching an HOA with Eni are significant steps that move forward the monetization of the discovered natural gas resources in addition to the ongoing efforts to secure LNG customers.”

Eni is the operator of Area 4 with a 70% participating interest. The other partners are GalpEnergia (10%), KOGAS (10%), and ENH (10%, carried through the exploration phase).

Anadarko Moçambique Area 1 Ltda. consists of Anadarko Petroleum (36.5%), Mitsui E&P Mozambique Area 1 Ltd. (20%), Empresa Nacional de Hidrocarbonetos (15%), BPRL Ventures Mozambique BV (10%), Videocon Mozambique Rovuma 1 Ltd. (10%) and PTTEP (8.5%).

New Discoveries Boost Project

Both companies continue to delineate the fields, adding to total reserves. Eni’s newest delineation wells were the Mamba South 2 and Coral 2 wells, which added 6 Tcf plus to the resources of Area 4. The full potential of Mamba Complex in Area 4 is estimated at 75 Tcf of gas in place.

The wells were about 50 km (30 miles) off the coast in over 1,900-m (6,270-ft) water depth. Eni announced the discoveries in early December 2012. Mamba South 2 flowed dry gas with an estimated sustained production rate of 140 million standard cubic feet per day. Coral 2 was awaiting a production test.

Eni plans to drill at least two further delineation wells back-to-back, Coral 3 and Mamba South 3, in order to assess the full potential of the Mamba Complex discoveries.

In June 2012, Anadarko made another significant natural gas discovery in Offshore Area 1 of the Rovuma Basin. The Atum discovery well encountered more than 92 m net (300 ft) of natural gas pay in two high-quality Oligocene fan systems. Preliminary data indicates this latest discovery is connected to the partnership's recent Golfinho discovery, which is about 16.5 km (10 miles) to the northwest of the Atum well.

At the time, Walker said, "With this latest discovery at Atum and a successful upcoming appraisal program, we believe the total estimated recoverable natural gas resource in Mozambique's Offshore Area 1 is between 30 and 60 Tcf, and the current upside for total gas in place for the discovered reservoirs on the block is approaching 100 Tcf. We still have additional exploration opportunities that could expand the resource potential further.”

In addition to Mozambique, the continued discovery of natural gas reserves in Tanzania could result in East Africa challenging Qatar and Australia for the title of largest producer of LNG in the world.

Contact the author, Scott Weeden, at sweeden@hartenergy.com.