Mozambique: Waiting For The Gas Boon
Mozambique announced at the end of April the discovery of new gas reserves amid hesitation by oil companies to resume old projects that were already under construction but stalled due to terrorist attacks. The Mozambican authorities guarantee that conditions are already in place to restart oil and gas exploration activities, but the companies say they are still carrying out independent assessments. On the other hand, although sporadically, terrorist attacks continue in the gas-rich province of Cabo Delgado.
By Jorge Joaquim
New oil and gas prospecting areas in Mozambique are showing preliminary signs of potential for exploration. The country’s National Petroleum Institute announced at the end of April the discovery of natural gas in a research well, drilled by the South African company Sasol, in Inhassoro district, in the southern province of Inhambane. It is the second well drilled by Sasol and the first well drilled in the same area gave negative results. The wells were drilled as part of Sasol’s contractual obligations.
The INP statement said that Sasol will continue work to assess the scale of the new discovery, and its commercial viability. The well was drilled between 25 March and 5 April, and reached a depth of 1,934 metres.
The concession contract for research and production of hydrocarbons in the onshore area was signed on 17 October 2018. Sasol holds a participating interest of 70%, and Mozambique’s publicly owned National Hydrocarbons Company ENH holds the remaining 30%.
Sasol has been operating in Mozambique since 2004, and operates the Pande and Temane onshore gas fields in Inhambane. It runs the gas processing plant at Temane, from which gas is transported by pipeline to South Africa. Some of the gas is taken from the pipeline for industrial use in southern Mozambique, including the production of electricity.
The drilling does not stop here. Italian oil company ENI is preparing to deploy the first exploration well in an area off the coast of Angoche in Nampula province. The West Capella drilling platform, owned by Aquadrill, and contracted by the concessionaires to prospect in the area, is already in Mozambicans waters and is about to reach the site of the research well.
This development follows the completion of a first assessment of petroleum potential in the concession area, an activity agreed with the government in December 2018. The well drill activity to investigate the presence of hydrocarbons in Tertiary turbiditic complexes was expected to start in April.
This is the first exploratory drilling in this part of the Mozambique Basin, which occupies both central and southern parts of the coastal plain of Mozambique and will greatly further the collection of geological information and the assessment of the region’s petroleum potential.
Oil giants reluctant to resume gas projects
Mozambique already has natural gas reserves that are among the largest in the world, in the Rovuma basin in the north of the country and also has deposits under exploration in Inhambane province, in the south. The Rovuma project, led by Total, was the largest private investment in Africa until it was suspended in March 2021 due to terrorist attacks in Cabo Delgado – some claimed by the ‘jihadist’ group Islamic State.
Mozambique’s President Filipe Nyusi has called on Western energy companies to resume work in Cabo Delgado Province, saying security has improved around the town of Palma. Addressing the 2023 Mozambique Gas & Energy Summit in Maputo at the end of April, Nyusi assured foreign investors the security situation in troubled northern Cabo Delgado Province had improved.
He said locals were returning to the town of Palma and other areas they had abandoned because of terrorist attacks. Nyusi urged Western energy companies to do the same. He said the success in combating the terrorists in the districts of Mocimboa da Praia and Palma improved stability since the attacks on the town of Palma.
“The working environment and security in northern Mozambique makes it possible for Total to resume its activities at any time,” he said.
In March 2021, France’s Total Energies halted exploration of a major gas field and a $20bn plant in northern Mozambique after terrorist attacks.
In the same view with Nyusi’s speech, Australian mining company Syrah Resources, which exports graphite for electric car batteries from Balama district, recently said in a statement that the security environment in Cabo Delgado province has generally improved since 2022.
In March 2023, the French giant’s Italian subcontractor, Saipem, announced preparations to resume work, saying it had been informed that “safety has improved.”
However, disagreements between TotalEnergies and its contractors over costs is a major obstacle for the resumption of the LNG project at Afungi, Total CEO Patrick Pouyanné told investors at the end of April. Some contractors are being “unreasonable”, according to Pouyanné, who said Total will not pay “undue costs” for the suspension of the project. He insists that contractors can only return if they charge the same price as when the project was halted two years, and do not raise their prices.
Terrorists attacks continue
Although insurgents remain active in Cabo Delgado, clashes with security forces in the greater part of the province have subsided. Troops from Rwanda and the Southern African Development Community have helped retake towns from the insurgents but have not been able to contain or end the fighting.
Villagers who had been returning to some areas of the province after earlier jihadist attacks have been forced to flee again. Meanwhile, the population of Palma district, in the far north of Cabo Delgado, where liquefied natural gas projects are planned, remains in an extremely precarious situation.
Islamist terrorists have been striking at the northern province of Cabo Delgado since October 2017. These raids have displaced over a million people from their homes, provoking a humanitarian crisis. Terrorism has spilled over the provincial boundaries, with occasional attacks in Niassa and Nampula.
While the attacks continue, the International Monetary Fund expects TotalEnergies to start producing LNG in 2027, with the neighbouring Area 4 project led by ExxonMobil to follow in 2029, according to an economist from the IMF’s African department, Thibault Lemaire.