U.S. energy firm, Anadarko Petroleum Corp on Tuesday, gave the go-ahead for the construction of a $20 billion gas liquefaction and export terminal in Mozambique, the largest single LNG project approved in Africa.
The announcement had been expected after Anadarko flagged the decision date last month.
“As the world increasingly seeks cleaner forms of energy, the Anadarko-led Area 1 Mozambique LNG project is ideally located to meet growing demand, particularly in expanding Asian and European markets,” Chief Executive Officer Al Walker said in a statement.
Anadarko has agreed to be taken over by Occidental Petroleum Corp. Once that deal goes ahead, Occidental has agreed to sell assets including the Mozambique LNG project to French oil major and large LNG trader Total SA.
Natural gas use is growing rapidly around the world as countries seek to meet rising energy demand and wean their industrial and power sectors off dirtier coal.
The project, which has committed long-term supplies to utilities, major LNG portfolio holders and state companies around the world, underscores the industry’s conviction that LNG demand will soar in years to come despite a slump in prices this year.
Low prices for the gas that is super-cooled for transportation prompted fears final investment decisions (FIDs) such as Anadarko’s would be delayed or scrapped. But enough long-term buyers were gathered to underpin the project’s financing.
LNG prices slumped this year as a jump in supply from new terminals in the United States, Australia and Russia were not totally met by higher demand in Asia.
The trade is also nowhere near as developed as the market for crude oil, causing erratic price movements and is expected to be transformational for Mozambique, beset by economic crisis, conflict stemming from a civil war and governance malaise, whose annual gross domestic product is just $13 billion.
According to the government of Mozambique, the project is expected to create more than 5,000 direct jobs and 45,000 indirect jobs.
With a 12.88 million tonne per year (mtpa) capacity, Mozambique LNG is one of the largest greenfield LNG facilities to have ever been approved. It involves building infrastructure to extract gas from a field offshore northern Mozambique, pump it onshore and liquefy it, ready for further export by LNG tankers.
On the African east coast, the liquefaction plant will be able to sell LNG to both the lucrative Asian market, home to 75%of global LNG demand, and to the flexible European market, which helps balance global LNG trade by soaking up excess supply.
