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ENI's FLNG promises to be a technical feat for the company, but can it also bring about greatly needed development for the country?
After gas reserves were first found by Andarko in 2010, it didn't take long for other international companies to join in exploration of efforts. With its involvement in two out of three major liquid natural gas (LNG) projects, ENI is set to play a major part in the development of Mozambique's natural gas industry. Out of all these projects, the Coral South Floating LNG (FLNG) is one of the most anticipated, due to its technically innovative nature and what it might mean for the country's future development.
The FLNG will be located on Eni's greater Coral Field, which has a total of 10 trillion cubic feet of proven reserves. The actual FLNG itself will be the first purpose-built FLNG in Africa and the third of its kind globally, an engineering feat capable of producing 3.4 million tons of LNG annually. In 2016, an agreement was signed with BP by Area 4 partners for 100% of the FLNG's production for 20 years, with an optional 10-year extension. In June 2017, the project's start-up phase was begun after Eni closed all the necessary regulation, drilling, and financing contracts for USD4.7 billion. The produced gas will be sold by Eni and other Area 4 concession holders that include CNPC, Galp, Kogas, Mozambique state company Empresa Nacional de Hidrocarbonetos (ENH), and ExxonMobil through its operator Mozambique Rovuma Venture. In 2018, the FID for the project was signed by the partners guaranteeing Eni 25% of its holdings, ExxonMobil 25%, CNPC 20%, ENH 10%, Kogas 10%, and Galp Energia 10%. In September 2019, drilling of the six subsea wells, each with an average depth of 3,000m, to feed the liquification unit began. The unit itself, currently under construction in South Korea, will eventually weigh 222,000 tons, measuring 432m long and 66m wide. Moored 50km off Palma Bay in Cabo Delgado, the structure will be able to house up to 350 people in its eight-story accommodation module. The hull, made up of 24 modules, will accommodate storage facilities for substances to be processed and produced on the floating plant, namely LNG and condensates, and will also house electrical, instrumentation and mechanical rooms and maritime systems related to cargo management. Meanwhile, its topside will consist of 12 gas treatment and LNG modules. It is reported to be the first FLNG to be deployed in deep waters, at a depth of approximately 2,000m by 20 mooring lines weighing 9,000 tons combined.
In May 2020, the first topside module was installed on the unit's hull, in spite of COVID-19 sending the global economy into a tailspin. Indeed, the virus has had little effect on the project's timeline: as of June 2020, drilling and well completion were still planned for early 2021. According to INP Chairperson Carlos Zacarias, the FLNG unit was already 73% complete. As such, Eni plans for production to begin fully in 2022. While many are excited by the coming of the FLNG, others are more worried about whether the profits will result in betterment of Mozambique and specifically the local area of Cabo Delgado, which has recently experienced an uptick in violence by a local Islamist insurgency. Furthermore, it may divert government investment from other areas of the economy, making the future Mozambican budget reliant on LNG prices, which the latest pandemic has shown are not as stable as once thought. Speaking to the Financial Times, Luiz Fernando Lisboa, the Catholic bishop of Pemba, the province's capital, recently said. “If they don't involve the population, if they don't bring jobs to the youth, the [gas] resources will end up becoming a curse."
No matter these warnings, the government expects to receive USD49.4 billion in state revenue over the lifetime of various LNG projects. Eventually, Mozambique could become the third-biggest producer of LNG in the world. With a pipeline to neighboring countries like South Africa, Zambia, or Zimbabwe, the country could manage to avoid direct competition with mega exporter countries like Australia, Qatar, Russia, and North America, which are all investing billions to boost capacity in anticipation of imminent global demand.
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TABLE OF CONTENTS
Interview
Lourenço Sambo, General Director, Agency for the Promotion of Investments and Exports (APIEX)
APIEX is formulating different strategies to target and attract new investors into the country, support existing ones, and help achieve reforms to improve the business environment in the country.
read articleFocus: Heavy mineral sands (HMS)
The time is now
Mozambique is home to major mineral sands deposits, most of which remain unexploited. With demand for titanium, rare earth elements, and zirconium on the rise, heavy mineral sands projects in the country are now attracting significant attention from international mining companies, even in times of crisis.
read articleInterview
Janfar Abdulai, Minister of Transport and Communications,
The Ministry of Transport and Communications aims to make Mozambique a logistics hub in the SADC region by leveraging the country's strategic location, introducing friendlier regulation, and building robust infrastructure.
read articleFocus: Breweries in Mozambique
Beer battles
Although underdeveloped, Mozambique's beer industry has a long history and a bright future. Home to one of Africa's most-awarded beers, Laurentina, the country is now a battleground for Heineken and ABInbev, two of the largest beer companies on the planet.
read articleInterview
Custódio Mucavele, Country Program Officer Mozambique, International Fund for Agricultural Development (IFAD)
IFAD is a UN-specialized agency that works with the government on agricultural transformation, with particular attention on developing value chains in the agriculture and fisheries sectors.
read articleFocus: Reforming the agricultural sector
On the right track
Mozambique's agricultural sector holds great potential for growth, but it is a sector beset by challenges. Although the government has implemented a host of reforms in recent years, more needs to be done to ensure a supportive business environment.
read articleB2B
Empowering smallholder farmers
ECA is a private agro-processing company and a greenfield venture made possible by AgDevCo, a social impact investor that promotes the launch of new agribusiness opportunities. Together, they are creating income-earning opportunities for Mozambican farmers and improving financial inclusion.
read article
