Investment by Indian exploring companies in Mozambique gas field is unlikely to see any returns till 2022. This is due to instability in the host nation and not-so-keen approach by other consortium partners and no signs of a liquefied natural gas (LNG) terminal, required to transport fuel. The field was expected to start production by 2019. Indian companies have made an investment of $6.5 billion in the African country. While ONGC Videsh (OVL) , the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), holds 16% stake in Mozambique offshore block Rovuma Area 1, having a proven reserve of 75 trillion cubic feet, Oil India has 4% stake and a unit of Bharat Petroleum Corporation holds 10% stake in the around 10,000-square-kilometre block located in northernmost part of offshore Mozambique Rovuma Basin. According to N K Verma, managing director of OVL, it will take at least four years from the commencement of work of an LNG terminal for production to start.“We expect a delay of at least two years,” Verma said. India’s petroleum minister Dharmendra Pradhan had met his Mozambique counterpart Leticia Klemens in Tokyo during October 2017 to discuss expediting the work in the fields. In a tweet, Pradhan had said that Klemens agreed to fast-track the gas development project. According to a person close to the development, though the Mozambique field is good, logistics is a problem.
“To carry gas, we need a huge LNG facility. Creating the facility will be an issue as there are many agencies with varied interests at the site. The local government is also not sure of what to do. Mozambique was supposed to start giving returns by 2019 but it will not happen before 2021 as LNG terminal will be ready only by then at the earliest. So far, there is no plan,” said the person. The Rovuma’s Area 1 is one of the largest natural gas discoveries in offshore East Africa and may well become one of the world’s largest LNG producing blocks.
However, reports suggest technical and financial issues, apart from political, are affecting the projects. Verma, though, believes that though there may be some financial losses due to delay, if LNG prices rebound, investors will be able to recover losses. With large LNG supplies from Australia and Russia, especially, global supply is expected to increase 50% during 2014-2021, thus affecting prices. In fact, given that LNG market has become demand-driven, India has been able to renegotiate LNG prices for long-term contracts with Qatar, Australia and Russia. Verma also added that OVL in the meantime is looking to fix sale-purchase agreements.