TOGY talks to
ExxonMobil partners in Mozambique’s LNG futureMarch 27, 2019
Jos Evens, country manager for ExxonMobil Mozambique, talks to TOGY about the company’s landmark projects in the country, the importance of a timely FID and how ExxonMobil’s LNG expertise is poised to overcome challenges associated with Rovuma LNG. ExxonMobil Mozambique is active in three offshore blocks as well as the Area 4 projects.
What have been the key milestones of ExxonMobil in the country?
ExxonMobil always recognised the value of Mozambique. We were here in the 1980s exploring for oil and gas. We were always keen on getting involved in Mozambique. Therefore, we entered the 2014 fifth licensing round, in which we won three blocks.
In December 2017, we acquired 35.7% of the shares of Eni East Africa, which is now the Mozambique Rovuma Venture. As a result we secured a 25% indirect share in Area 4.
In July 2018, ExxonMobil submitted the plan of development (PoD) for the optimised production, liquefaction and marketing of natural gas for the first phase of the Rovuma LNG project in Area 4. We continue to work with government authorities to ensure that the PoD meets the expectations of all interested parties.
It’s important to continue to build on this momentum, as we look to reach the final investment decision in 2019. 2018 was a remarkable year because starting from a zero footprint, we have grown this organisation hugely to support our participation in Area 4.
In addition to the Area 4 project development activity, in October 2018, ExxonMobil as operator and Rosneft and ENH as partners signed contracts for three offshore exploration blocks with the government of Mozambique. These concessions are A5-B in the Angoche Basin and Z5-C and Z5-D in the Zambezi Delta.
What is the significance of the stake in Area 4 for ExxonMobil? What opportunities does the block offer to develop Mozambique’s oil and gas industry?
The deepwater Area 4 block contains more than 85 tcf [2.41 tcm] of natural gas, which will provide resources for a world-class LNG project. This means that the Rovuma LNG development has the potential to be a transformative project for Mozambique, one that will help deliver reliable, affordable energy to customers globally, and create long-term economic value for project partners and the people of Mozambique.
We fully appreciate and support the government’s strategic objective of using the gas projects as a catalyst for the socioeconomic development of Mozambique. The Rovuma LNG project is playing a significant role in Mozambique’s industrialisation and we are committed to supporting efforts in this regard.
The development of the country’s natural gas resources will have a multiplier effect in that it will support economic growth on various fronts. Ultimately, beyond the expected revenue that the project will generate for the respective stakeholders, the Rovuma LNG project will promote employment, improve infrastructure and develop associated industries that will assist in the socioeconomic development of Mozambique.
What are the intrinsic challenges associated with developing this greenfield project?
The intrinsic challenges apply to the Rovuma LNG phase 1 project. Mozambique does not have much experience in the oil and gas industry. We have to take into account that we need to find the necessary capacity in order not to cause a delay in the activities.
As an example, in building LNG trains, at the peak of construction about 20,000 people are involved. Some of the employees are local, but there are a lot of foreign skills needed, just because the capacity is not here yet.
ExxonMobil will apply its global LNG expertise and proven project management experience to ensure that we meet our project execution commitments. This will allow us to start gas production by 2024, thereby taking advantage of the window of opportunity created by anticipated growth in global gas demand.
As well, the security situation in the north that started in October 2017 has worsened. We are greatly saddened by these events and send our heartfelt sympathy to the victims of the recent attacks, their families and all of those who have been affected by this incident. ExxonMobil will continue to work with local authorities and industry to assess the situation, and ensure measures are in place to protect our workforce. Safety is a core value at all of our operations and facilities around the world.
How has the Rovuma LNG project been progressing?
The Rovuma LNG project has both a midstream component, led by ExxonMobil Mozambique, and an upstream subsurface component that will be led by Eni. We submitted a PoD in July 2018, and we did so early because we want to make sure we have enough co-operation from the ministries. Now we are waiting for the government to approve the PoD.
We continue to work with INP and the Ministry of Mineral Resources and Energy to support their efforts in the approval process. Ultimately, we share a firm goal of a final investment decision in 2019 with construction beginning in late 2019 and LNG production expected in 2024.
What is the relevance of securing the FID approval in 2019?
We submitted the PoD with the expectation of taking the FID in 2019, and we are still working on that plan. It is important to achieve this speed because the LNG market is a very competitive one.
All forecasts for 2024 say that the market will open up, and the demand will stay strong. LNG will have the strongest quote. Also, many of the suppliers will enter a depletion mode. Existing contracts will be expiring. This means that the gap and opportunity for new projects starts in 2024.
If you calculate five years as typical time for the development of a new plant, that’s the reason we realised that it was necessary to approve the FID in 2019 to position Mozambique in the front of the line. Competition is fierce, with many new projects, as well as expansion projects. The timing is essential.
In October 2018, ExxonMobil and partner Rosneft signed contracts for exploration blocks A5-B in the Angoche Basin and Z5-C and Z5-D in the offshore Zambezi Delta. What is the potential of these blocks, and how do you expect to develop them?
We have always recognised the strategic importance of Mozambique, and were keen on getting involved. That is why in 2014 we entered Mozambique’s fifth bidding round.
By the end of 2018, we had acquired all the seismic data. We have made an exploration plan. The expectations are that in the early 2020s we can start the first exploration and drilling in these three blocks.
These blocks are significant for ExxonMobil as they mean we have the country covered from north to south. There is Area 4 in the north, then exploration in the Zambezi Delta and Angoche areas, and then our head office activity in the south.
We believe that our expertise in conducting successful deepwater exploration projects positions us as a reliable partner for the government of Mozambique and we look forward to exploring the resource potential of these three high-quality blocks. The addition of these blocks reaffirms ExxonMobil’s commitment to the government of Mozambique to explore and develop the country’s hydrocarbons resources.
How do you compare Mozambique with the major LNG producers?
One of the advantages for ExxonMobil is that we have experience in similar developments such as Qatar, Papua New Guinea and Australia, and this experience will benefit us in Mozambique.
From the perspective of the size of the resources, these developments are different, but the potential of Area 4, combined with Area 1 and Coral is high, totalling more than 30 million tpy. Qatar at the moment has 77 million tpy of existing capacity, so in a short time Mozambique will reach almost half of Qatar’s production. But there is also a potential for a phase 2 and a phase 3. So, in the long term, Area 4 might reach 50 million tpy.
Qatar has more gas and they are very cost effective; that is why is it is so crucial that the cost competitiveness of Mozambique is there. These projects are long-term projects, lasting 25-30 years, and to protect yourself against the cycles, you need to be at the lowest end of the cost.
Most of the big companies are positive about Mozambique.
What are ExxonMobil’s initiatives to ensure knowledge transfer to the local workforce and the development of local content?
We aim to work with the government, communities and local companies to meet and hopefully exceed legal obligations on national content. If you want to be cost efficient, you have to be reliant on the local capacities.
We believe in the importance of using local suppliers and hiring local workers where possible in order to maximise the economic benefits this project can bring to the country. We will make every effort to actively build the local workforce and suppliers, transfer technical experience and encourage entrepreneurialism and participation by Mozambican stakeholders. Through our enterprise development centre, we will work with Mozambican businesses to ensure they are able to attain the prerequisites for certification.
The Rovuma LNG project has a significant local content strategy that envisions a predominantly Mozambican workforce once in operation, a robust community investment strategy that is sustainable and aligned with priority needs of our host communities and active engagement of local suppliers in support of the goods and services that we can procure locally.
The operations readiness team is already working to hire and train Mozambicans for the operation phase, where we expect to reach an 85% national workforce, as is the case in all other countries ExxonMobil works in.
To accomplish this shared objective, we are targeting the FID in 2019. To this end we are also working collaboratively with government institutions on matters related to visas and immigration, Customs and security.
What are ExxonMobil’s objectives for 2019 and medium and its long-term vision for the country and the region?
We are working actively with the government of Mozambique to secure approval for the Rovuma LNG PoD. This is a critical first step to ensure that we are able to work with the financial community to ensure a final investment decision in 2019. Achieving these milestones will ensure that we are in a position to start producing gas by 2024.
Not only will this start generating revenues for all stakeholders, but the associated industries and economic activity between the FID and the start of production will be a tremendous boost for Mozambique’s economy on various fronts.
In addition, we are confident in the potential of our exploration programme as the base for future growth of our business in Mozambique.
The organisation after the FID will grow quickly. We are committed to our long-term business strategy in Mozambique. We recently acquired a plot of land in Maputo that will go towards our future installations.
Mozambique holds a prominent position in ExxonMobil’s global upstream portfolio. We look forward to a long relationship of co-operation and partnership, as we deliver on our promise to the government and communities across Mozambique.