A virtual event is being planned for early August to expose South African companies to the opportunities that are likely to arise directly from the mega-scale liquefied natural gas (LNG) projects that are starting to take shape in northern Mozambique, as well as various associated projects, ranging from a new airfield, to housing, roads, warehouses and offices.
Despite rising concerns over an increasingly aggressive insurgency in the territory, as well as recent Covid-19-related delays and a sharp fall in gas prices and demand, financing for the $23-billion, Total-led onshore Mozambique LNG project has been secured, with more than $15-billion in debt facilities signed on July 15.
In June 2019, a final investment decision was taken on the project, which will produce 12.9-million tons of LNG yearly, beginning in 2024.
A joint venture between McDermott, Saipem and Chiyoda, known as the CCS JV, was also appointed for the Mozambique Area 1 LNG project, which was initially developed by Anadarko.
The project includes the development of the Golfinho and Atum fields located within Offshore Area 1 and the construction of a two-train liquefaction plant. Area 1, which is located offshore, contains more than 60-trillion cubic feet (tcf) of gas resources, of which 18 tcf will be developed with the first two trains.
Anadarko’s 26.5% operated interest in the Mozambique LNG project was subsequently acquired, also in 2019, by Total for $3.9-billion.
In May this year, it was reported that financing commitments worth $15-billion from 20 banks, including several South African banks, were close to being signed.
Crucially in light of the threat of violence in the territory, several government-linked agencies are also backing the development, including the Export Credit Insurance Corporation of South Africa, which has indicated that it is aiming to provide commercial and political risk cover of up to R20-billion for South African firms involved in the project.
In September last year, the Export-Import Bank of the US authorised a direct loan of up to $5-billion to support the export of American goods and services for the development and construction of the project, located on the Afungi peninsula, in the Cabo Delgado province.
Since then it has been reported that various other export credit agencies from Asia and Europe would also support the project, the capital cost of which is materially larger than Mozambique’s yearly gross domestic product of about $15-billion.
The project-exposure webinar is being organised by project consultancy Africa House in collaboration with the Pemba Chamber of Commerce. Pemba is the capital of Cabo Delgado province and is more than 2 400 km north of Mozambique’s capital, Maputo.
Africa House directors Roelof van Tonder and Duncan Bonnett tell Engineering News that the virtual event, which will take place on August 4, will include speakers from various companies and entities that are participating directly in the LNG project, or which are active in the territory.
It will be followed, on August 5, by breakaway sessions with various Mozambican companies that are willing to establish partnerships with South African firms keen to participate in the activities either directly associated with the gas projects, or that will arise as a result of the project.
There are several local-content requirements associated with the Mozambique LNG project and the CCS JV has stated that national content is a key tender evaluation consideration for subcontractors.
Bonnett says that it will, thus, be critical for South African companies to establish a local presence in northern Mozambique if they are to be in the running for the business opportunities that are set to arise.
The event will also be used, however, to reinforce that the opportunity is a real one; a narrative that is currently at risk of being drowned out by the security concerns. “What is emerging is that this project will not be derailed by the security threat, which is real and has had a definite impact,” Van Tonder avers.
“In fact, it has been quite amazing to see that the export credit agencies are stepping up to provide political-risk insurance in an environment that has become increasingly uncertain as result of the pandemic, which has led to a sharp fall in oil and gas prices, and while an insurgency is raging.”
In parallel with the event, Africa House will be introducing a ‘Project Viability Screening Platform’, through which it will seek to develop a database of projects that are most likely to advance as a result of developments in Mozambique.
“There are major developments planned in and around this project, including a new airfield, new warehouses and office parks and social and housing infrastructure. The Mozambican government also has ambitions for what they are terming a ‘Gas City’, which aims to develop domestic industries around the major gas finds,” Bonnett explains.
The platform will initially identify, screen and assess a long list of roughly 20 projects across Mozambique that will be needed to support the construction of the LNG plants over the next 10 to 15 years.
In time, it will be extended to other territories in Southern African where a mega-scale project has the potential for various spin-off developments.
“The idea is to pool the risk associated with gathering project intelligence and then packaging these in a way that highlights the business opportunities that are set to arise,” Bonnett explains.