The gas El Dorado in Mozambique and Tanzania isn’t just feeding the frenzy of Asian countries that need huge quantities of gas but has also swept up historical producers like Algeria and Russia. Boasting gigantic gas reserves, the two countries are determined that the area – in which 200 TCF of gas have already been discovered – doesn’t slip completely beyond their control.
Gazprom and Sonatrach turn up after the battle – Although the most promising blocks have already been awarded, long-standing producers like Russia and Algeria want their part of the cake. The area offers an opportunity to them to invest their petro dollars but also a danger if that investment triggers a massive drop in the price in Asia. Executives fromGazprom International were in Dar es Salaam last week to inform the authorities of their interest in an auction of seven offshore licenses – the deadline for bids is May 15 – as well as that of Tanganyika North . Elsewhere,Gazprom approached the government in Mozambique in 2011 in a bid to acquire offshore acreage. At the time the Russians hoped to team up with Algeria’s Sonatrach. The Algerians, who enjoy special ties with certain leaders of Maputo’s ruling Frelimoparty who received military training in Algeria during Angola’s civil war (1975-92), have since travelled on several occasions to Maputo; the last time on June 10-11 in 2013 (AEI 704). For his part, Algeria’s energy and mines ministerYoucef Yousfi flew to Dar es Salaam in early January with Sonatrach’s managing director,Abdelhamid Zerguine, in tow.
Asians bring the cash – At present, the Tanzanian blocks which house 40 TCF (blocks 2 (Statoil/Exxon) and 1-3 and 4 (BG, Ophir) are all operated by Western groups. That also applies to Mozambique where some 180 TCF are operated by Anadarko and ENI (blocks 1 and 4).The two latter groups are determined to upgrade their acreage before construction of a liquefaction plant at Afungi, where the first trains are to start functioning around 2019/2020. Few companies have the experience required to develop such a liquefaction project in areas that lack the least infrastructure and lie hundreds of kilometres from capital cities, and where local governments and administrative services are chronically short of trained engineers and parliaments are being increasingly swept by nationalist sentiments. For those reasons Asian companies have limited themselves up to now to acquiring minority stakes that guarantee them what they see as most important: special access to future gas cargoes. All of the companies that recently bought into the five permits where East Africa’s reserves are concentrated hail from nations suffering from a chronic shortage of oil and gas on their soil. For example, Anadarko’s block 2 in Mozambique is controlled by Thailand’s PTT,ONGC and Oil India from India and Japan’sMitsui while Korea Gas and China’s CNOOChave bought into ENI’s block 4. And in Tanzania it was only when Pavilion Energy, an arm of the Singapore investment fundTemasek acquired 20% of Ophir’s holding last December that it became clear where gas from block 1-3 and 4 would partly end up.
ENH and TPDC want their say – The oil industry is besieging Dar es Salaam and Maputo but the two capitals have completely switched strategy since the first offshore discoveries in 2010. Aware of their new-found muscle and fresh role on the gas market, they aren’t shy about advancing their demands. Tanzania’s national company TPDC, which is going to hire over 50 people this year, has issued a new standard contract that will oblige future bidders for acreage to reserve a 25% stake for it. In the coming licensing round, to be held at the end of the year or in 2015, Mozambique’s ENH will be even hungrier, and it also counts on increasing its influence through the multiple joint ventures it has forged since 2013 through its affiliate ENH Logistics. For instance, it set up Sociedade de Portos de Cabo Delgado to construct, operate and maintain natural gas ports at Pemba and Palma in the gas province of Cabo Delgado, as well as Enmar SA with Subsea 7 Portugal for oil services.