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Shell touts floating LNG as it seeks share of Mozambique gas riches

BY ALEXIS FLYNN

ABERDEEN -- Shell is pitching its floating LNG technology direct to the government of Mozambique as way to gain entry to one of the world' s hottest energy plays, after the oil major failed to buy its way into huge gas discoveries offshore East Africa.

The presentation of the technology during a visit by Mozambique' s president, Emilio Guebuza, to the home of the U.K. oil industry, suggested Shell is looking for ways to bypass the companies which have made the gas discoveries-- Anadarko Petroleum and Eni--and deal directly with the government.

"We are the leading independent company in the world of integrated gas today," Bruce Steenson, Shell Australia' s vice president of technical and the Prelude project, told an audience of government officials from Mozambique in Aberdeen, Scotland. "Hopefully we can use that capability to forge some long-lasting partnerships with Mozambique."

Mozambique could eventually become one of Africa' s biggest energy exporters, following the discovery of giant natural gas fields in the deep waters off its northeast coast. The discoveries are ideally placed to serve Asian export markets.

Shell tried to gain a foothold in the region last year by bidding $1.8 billion for Anadarko' s junior partner, U.K.-listed Cove Energy. However, Shell was outbid by Thailand' s PTT Exploration & Production.

In May, Shell revealed it has been in talks with Anadarko about acquiring a stake in its Mozambique fields, but had pulled back because the asking price was too high.

Mr. Guebuza said Thursday that he wants Mozambique' s first LNG exports to start shipping in 2018, an ambitious deadline in a country that has no established oil and gas industry and limited infrastructure.

Shell' s floating LNG vessels will produce, liquefy and transfer gas to tankers for export, removing the need for a costly and complex onshore terminal. The technology is being used on a project in Australia with a similar five-year development schedule and could be one solution for Mozambique, said Mr. Steenson.

Shell took the decision to deploy a $10 billion floating LNG vessel on Australia' s Prelude field in 2011 and it is due to start operating late in 2016 or early in 2017, said Mr. Steenson. The Prelude vessel, the first of its kind in the world, will produce around 5.3 million metric tons of LNG and condensate a year, he said.

At present, the rights to export LNG from Mozambique rest with the firms operating the concessions where most of the 108 Tcf of natural gas have been found, said Arsenio Mabote, chairman of the Mozambique' s state-controlled National Petroleum Institute Thursday. Talks with the companies on how best to proceed with the development should conclude within in the next few months, he said.

Anadarko and Eni have said that they want to develop an LNG plant together, although some industry analysts say a project of the scale envisaged by the Mozambique government would likely require additional investment from larger companies with better-established LNG shipping businesses.

The government of Mozambique expects it will cost at least $40 billion to develop its natural gas infrastructure. This includes facilities capable of exporting 20 million t of LNG annually, and a local distribution hub that will service its domestic energy needs and those of its near neighbors.

Calls to Anadarko and Eni for comment weren' t immediately answered. Speaking last October, Eni' s Head of Exploration and Production Claudio Descalzi said Shell, "could be a wonderful partner."

In a separate announcement Friday, Eni said it has completed a deal to sell 20% of its Mozambique gas discoveries to China National Petroleum Corp. for $4.21 billion.

Shell could make its technology available for use in Mozambique without having to become an equity partner in the gas discoveries, Mr. Steenson said.

"In Woodside' s Pluto venture, we don' t participate as an equity partner, but we provided technical services to Woodside to enable them to design and build the facility," said Mr. Steenson, referring to an Australian LNG project. He also highlighted similar partnerships with Chevron at the Gorgon and Wheatstone LNG projects, also in Australia.

Dow Jones Newswires

07/26/2013

 

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