Report: ExxonMobil, Total in Talks Over Mozambique Gas Resource-sharing Deal

Share:

 ExxonMobil and Total are in negotiations over their massive LNG projects in Mozambique, with each seeking to extract more gas from a shared field that straddles the two developments and cut costs, three sources familiar with the matter told Reuters.

The talks between the energy majors also involve the Mozambican government, according to the sources, as it has to give final approval to any new agreement.

The field that straddles the projects happens to contain gas that is thicker and therefore cheaper to extract and convert into LNG than reserves elsewhere in the projects.

The volume each project could extract from the shared area was set out in a 2015 “unitisation” - or resource-sharing - agreement. However both U.S. major Exxon and France’s Total are now renegotiating that contract with each other, the sources said.

The companies are looking to cut costs wherever they can, bruised by a COVID-19-induced collapse in global oil and gas prices and facing a worsening security situation in Mozambique.

Across the industry, most companies have been forced to delay decisions on new LNG projects and write down investments in existing production plants, in stark contrast to last year’s record level of approvals for plants.

Success in the talks could be particularly important for Exxon, which still has to woo investors ahead of a delayed final investment decision (FID) on its $30 billion Rovuma LNG project, which the sources now don’t expect until early 2022.

The FID on Total’s $20 billion Mozambique LNG project was made in June 2019.

The current contract was signed by Eni and Anadarko. In 2017 Eni sold a stake in the Rovuma venture to Exxon, which is now the project operator, while Anadarko sold Mozambique LNG to Total last year.

It allows the projects to extract a combined 24 trillion cubic feet of gas from the “straddling” reserves, with a 50/50 share in phase one of development.Credit: Total

Now Exxon and Total are trying to rework the agreement to increase extraction from the straddling reserves as a way to boost efficiency and increase their projects’ annual LNG production, according to the sources.

“They want to use the cheapest gas first - which is the straddling resources,” said one of the sources.

Asked about the negotiations, an Exxon spokesman said: “As a matter of practice, we do not comment on third-party rumor or speculation.”

“ExxonMobil continues to actively work with its partners and the government to optimize development plans by improving synergies and exploring opportunities related to the current lower-cost environment,” he added.

Total said the operators of the two projects “continue working together to maximize synergies and optimize future phases of development”.

Mozambique’s state oil and gas company ENH, which owns 10% of Rovuma LNG, and 15% of Mozambique LNG, referred Reuters’ questions to the National Petroleum Institute (INP), the body that manages the nation’s energy development.

The INP did not provide answers to Reuters' questions.

BOOSTING PRODUCTION

A Standard Bank study from 2019 said Exxon’s Rovuma LNG would use 15.1 Tcf of straddling gas reserves, above the unitisation cap as it included gas reserved for domestic use and condensate, plus 6.4 Tcf of non-straddling reserves - to produce 15.2 million tonnes per annum (MTPA) of LNG.

Instead, the source said, Exxon wants to extract only gas from the straddling reserves, increasing the amount it can access from the shared area to around 20.1 Tcf, which would result in 7.9% higher production, at 16.4 MTPA, and lower unit costs.

This would mark a considerable efficiency gain for Rovuma’s phase one, projected by Exxon to last 25 years.

Mozambique LNG expects to produce the first LNG in 2024, delivering 12.88 MTPA of LNG in its first phase.

No comments

More Popular Posts

About Crude Oil Facilitators

Crude Oil Facilitators are dedicated global brokers and facilitators of crude oil buying and selling. We work directly with crude oil buyers and crude oil sellers worldwide. We are a United Kingdom and Nigerian based firm, privately owned and devoted to the brokering of crude oil and other petroleum products buying and selling.

We have buyers and sellers of;

1. Nigerian Bonny Light Crude Oil, BLCO

2. D2 Diesel Fuel, JP54 Jet Fuel, Mazut etc.

3. Saudi Light Crude Oil, SLCO

4. Iraqi Light Crude Oil

If you are a buyer or seller of crude oil or other petroleum products or have mandate to buy or sell any of the above oil products, do contact us because we could be of help.

To contact Crude Oil Facilitators, click here ». To learn more about Crude Oil Facilitators, click here


Crude Oil Facilitators