Africa’s largest LNG project – Rovuma in Mozambique has been seen as the new frontier in the global hydrocarbon industry and a game changer in the economy of the country.
But the Mozambique LNG project has had its fair share of challenges, latest being an announcement by ExxonMobil majority shareholder, that the final investment decision (FID) will take place in 2021 and not this year as was expected.
The Final Investment Decision is the crucial step in a project that tells investors and shareholders that companies are ready to spend money on a new project, and that they expect the project, once fully operational, to make enough money to make the initial investment worth it.
ExxonMobil has blamed the delay to FID on the corona virus pandemic, however, the holdup was already envisaged – following on from another in 2019 – as ExxonMobil and its partners sought to deal with high costs and financing problems.
The major, announced in 2019 it wanted to cut costs for the US$ 33bn project before giving it the green light. The decision to postpone became inevitable when the challenge of building and funding one of the world’s most costly energy projects was compounded by the imposition of work and travel restrictions affecting personnel and supplies.
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The announcement was part of ExxonMobil’s decision to cut on the 2020 capital spending by 30 percent in response to falling demand and prices. However, the new FID announcement has deepened concerns given return to business normalcy is unlikely in 2021.
In 2019, a consortium of Fluor, JGC Corporation of Japan and TechnipFMC of France was awarded an engineering, procurement and construction (EPC) contract by Mozambique Rovuma Venture S.p.A. (MRV) for the Rovuma Liquefied Natural Gas (LNG) Phase 1 Project in Cabo Delgado, Mozambique with an immediate release of a limited notice-to-proceed.
Immediate commencement would have seen the consortium develop Area 4 of the ultra-deep Rovuma Basin, a giant offshore natural gas field with up to 15 trillion cubic feet of natural gas located off the coast of Mozambique.
MRV is an incorporated joint venture owned by Eni, ExxonMobil and China National Petroleum Corporation (CNPC), which holds a 70 percent interest in the Area 4 exploration and production concession contract.
If successfully completed, the project will elevate Mozambique’s status to one of Africa’s leading LNG exporter and a major global energy player. The LNG project is expected to produce 17,000 tonnes (t) of liquefied petroleum gas (LPG) a year.
