{"id":1343,"date":"2014-07-01T23:16:03","date_gmt":"2014-07-01T20:16:03","guid":{"rendered":"http:\/\/oilnewskenya.com\/?p=1343"},"modified":"2015-09-09T09:58:46","modified_gmt":"2015-09-09T09:58:46","slug":"lng-from-east-africa-how-the-odds-are-stacked","status":"publish","type":"post","link":"https:\/\/www.oilnewskenya.com\/index.php\/lng-from-east-africa-how-the-odds-are-stacked\/","title":{"rendered":"LNG from East Africa – how the odds are stacked"},"content":{"rendered":"

Story by\u00a0lexology.com<\/a><\/p>\n

How much gas?<\/strong><\/p>\n

Vast amounts. Mozambique alone is estimated to have gas reserves of up to 150 trillion cubic feet\u00a0 (TCF) and Tanzania potentially as much as 50 TCF (Petroleum-Economist). But in a global economy\u00a0 where commodity prices, consumer demand and ‘timing to market’ are crucial, there is no guarantee\u00a0 that even these amounts can be commercialised in the foreseeable future. However, for both\u00a0 countries the prize is great. In an article written by Nadja Kogdenko \u201cEast Africa: The Newest LNG\u00a0 Frontier\u201d according to the Mozambique Natural Gas Master Plan the country could potentially earn up\u00a0 to US $5.2 billion per annum by 2026 from LNG exports, creating over 70,000 jobs in the gas sector.\u00a0 If fully monetised, Tanzania could also expect a large inflow of revenue into its treasury.<\/p>\n

Where’s the Demand?<\/strong><\/p>\n

Although both Tanzania and Mozambique are forecast to have strong economic growth, there is no possibility that either could hope to consume such quantities of gas if produced at the maximum\u00a0 economic rate, which is the business model that investors and oil companies alike will use.<\/p>\n

Globally the picture is more positive. The US Energy Information Administration (USEIA) in their\u00a0 International Energy Outlook for 2013 give the reference case for World GDP increasing on average\u00a0 between 3.5% and 4.6% per annum between 2010 and 2040. It predicts that over the same period the\u00a0 global annual demand for gas will rise from 132 TCF in 2010 to 185 TCF. Much of this demand will\u00a0 come from Japan (its nuclear industry unlikely ever to recover fully from the shock of Fukushima),\u00a0 India, China and South-East Asia all of whom rely heavily on LNG imports. Geographically East Africa is ideally placed to supply LNG to these markets.<\/p>\n

What and where is the competition?<\/strong><\/p>\n

Unfortunately for Tanzania and Mozambique there is a lot and it comes in all shapes and sizes.\u00a0 Although, according to Wood MacKenzie, LNG from East Africa should be cheaper than that from\u00a0 Australia (US$7 per MMBTU compared with US$11 MMBTU), such advantage is wiped out by arriving late.\u00a0 Australia should bring on stream Queensland-Curtis, Gladstone and Australia Pacific LNG in 2015 and\u00a0 Gorgon and Wheatstone will follow on thereafter. Other competition will come from the US, now\u00a0 reaping the benefits of a rampant shale gas industry, which anticipates being in a position to\u00a0 export LNG as early as 2015. Canada and Russia equally have plans in the pipeline. Mozambique\u00a0 couldn’t hope to bring LNG on stream before 2018 and Tanzania before 2020. Closer to home, there\u00a0 are a number of LNG projects planned in Africa which if they all succeeded would add 84.1 million\u00a0 tonnes per annum of LNG to the World Market.<\/p>\n

Other issues for investors to consider are the race by countries to diversify supply. India and\u00a0 China’s demand for LNG may plateau, even diminish as their own shale gas projects come on stream\u00a0 and renewable technology brings down the cost of green energy, making it an attractive alternative.\u00a0 China’s energy hunger will have been in part satiated by its recent decision to buy 38 billion\u00a0 cubic metres (BCM) per year starting 2018 from Gazprom at a price reputed in an April report by\u00a0 Reuters to be in a range between $10-$11 MMBTU. This would be delivered by the as yet-to-be-built ESPO pipeline where deliveries could rise to 60 BCM per year.<\/p>\n

What’s the outlook for Mozambique and Tanzania?<\/strong><\/p>\n

Mozambique and Tanzania are described as being locked in a race to get the first LNG plant up and\u00a0 running on the east coast, or in the case of Mozambique, off the east coast as current investors,\u00a0 Anadarko and Eni, favour a floating LNG plant. And whilst Mozambique may currently appear more\u00a0 politically stable than Tanzania, whose politicians continue to bicker over constitutional reform,\u00a0 the existence of commercial quantities of oil in-country might mean Mozambique takes its eye off\u00a0 the ball, handing the advantage to Tanzania who has sought to encourage deep-water exploration by a\u00a0 reduction in its royalty rate from 12.5% to 7.5%.<\/p>\n

Also, with the recent announcement that Statoil\u00a0 and BG Group, whose interests lie in Tanzania, have now signed heads of agreement with the\u00a0 government possibly to take forward an LNG development, the advantage in the race may already have\u00a0 swung to Tanzania. However, as neither country can afford the massive investment required for an\u00a0 LNG plant both must attract foreign capital. This will prove challenging as neither \u00a0country is\u00a0 investment grade and both face strong competition from otherprojects around the World. Mozambique\u00a0 is at least trying to address some of the problems by introducing new energy and mining laws that\u00a0 will set up a clear regulatory and taxation environment but we question whether this will be enough\u00a0 to tempt investors. Tanzania will also need to introduce a unified investment legislative code if\u00a0 it is to attract foreign capital.<\/p>\n

And yet, notwithstanding how the odds are stacked, LNG from east Africa does make political sense, even if the commercial case still has to proven. At a macro-political level it could be the key to solving the region’s recent problems of political instability and poverty. Massive inward investment, the creation of local jobs and the availability of cheaper energy to aid industrial development for a region hard pressed for too long could be the shot in the arm, and not down the barrel, that both countries need, provided that the oil curse can be avoided. So in the interest of regional stability it would certainly be in the interest of the G7 countries to get the national governments, investors and oil companies alike to sharpen their pencils and make East African LNG a reality.<\/p>\n","protected":false},"excerpt":{"rendered":"

Story by\u00a0lexology.com How much gas? Vast amounts. Mozambique alone is estimated to have gas reserves of up to 150 trillion cubic feet\u00a0 (TCF) and Tanzania potentially as much as 50 … Read More<\/a><\/p>\n","protected":false},"author":2,"featured_media":801,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"jetpack_post_was_ever_published":false},"categories":[6],"tags":[147,202,203,236,388,671,768,971,1006,1161,1428,1636,2115,2191,2206,2290,2404,2466,2659,2742],"class_list":["post-1343","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news-by-others","tag-anadarko","tag-australia","tag-australia-pacific-lng","tag-bg-group","tag-canada","tag-east-africa","tag-eni","tag-gazprom","tag-gladstone","tag-international-energy-outlook","tag-lng","tag-mozambique","tag-queensland-curtis","tag-rovuma-basin","tag-russia","tag-shale","tag-statoil","tag-tanzania","tag-us-energy-information-administration","tag-wood-mackenzie","entry"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/www.oilnewskenya.com\/wp-content\/uploads\/2014\/03\/anadarko.jpg?fit=400%2C300&ssl=1","jetpack_shortlink":"https:\/\/wp.me\/p5JWkQ-lF","jetpack-related-posts":[{"id":695,"url":"https:\/\/www.oilnewskenya.com\/index.php\/east-africa-the-newest-lng-frontier\/","url_meta":{"origin":1343,"position":0},"title":"East Africa: the newest LNG frontier","author":"Samuel Kamau Mbote","date":"March 12, 2014","format":false,"excerpt":"Story by LNG With extraordinary discoveries of natural gas in the Rovuma Basin, East Africa is emerging as a new LNG frontier. The International Energy Agency (IEA) estimates that Africa holds nearly 74 trillion m3\u00a0of technically recoverable natural gas reserves, nearly 10% of the world\u2019s total, and it is believed\u2026","rel":"","context":"In "News by others"","block_context":{"text":"News by others","link":"https:\/\/www.oilnewskenya.com\/index.php\/category\/news-by-others\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":4422,"url":"https:\/\/www.oilnewskenya.com\/index.php\/minimal-funding-for-anadarkos-mozambique-lng-project-in-2016\/","url_meta":{"origin":1343,"position":1},"title":"Minimal Funding For Anadarko\u2019s Mozambique LNG project in 2016","author":"","date":"March 1, 2016","format":false,"excerpt":"Mozambique offshore Area 1 operator Anadarko has said it will allocate just minimal expenditure even as it works towards a final investment decision for its LNG project in 2016 despite huge expectations having already\u00a0selected\u00a0a consortium consisting of CB&I, Chiyoda Corporation and Saipem (CCS JV) for the initial development of the\u2026","rel":"","context":"In "Top News"","block_context":{"text":"Top News","link":"https:\/\/www.oilnewskenya.com\/index.php\/category\/top-news\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.oilnewskenya.com\/wp-content\/uploads\/2015\/04\/Area-1.png?fit=388%2C528&ssl=1&resize=350%2C200","width":350,"height":200},"classes":[]},{"id":8548,"url":"https:\/\/www.oilnewskenya.com\/index.php\/fnb-to-fund-totals-lng-project-in-mozambique\/","url_meta":{"origin":1343,"position":2},"title":"FNB Consortium to Fund Total\u2019s LNG Project in Mozambique","author":"","date":"July 9, 2020","format":false,"excerpt":"South African lender FNB Mozambique has announced that it is extended $15.8 billion to French Oil major Total to fund its massive\u00a0liquefied natural gas\u00a0(LNG) project in northern Mozambique. According to FNB the financing contracts were signed on Friday in a consortium that has seen over a dozen financial institutions including\u2026","rel":"","context":"In "Countries"","block_context":{"text":"Countries","link":"https:\/\/www.oilnewskenya.com\/index.php\/category\/countries\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.oilnewskenya.com\/wp-content\/uploads\/2019\/05\/Mozambique-Area-4.jpg?fit=500%2C372&ssl=1&resize=350%2C200","width":350,"height":200},"classes":[]},{"id":15510,"url":"https:\/\/www.oilnewskenya.com\/index.php\/geopolitics-and-energy-security-what-recent-moves-say-about-africas-global-gas-role\/","url_meta":{"origin":1343,"position":3},"title":"Geopolitics and Energy Security: What Recent Moves Say about Africa\u2019s Global Gas Role","author":"","date":"January 12, 2026","format":false,"excerpt":"The Council of the European Union (EU) and the European Parliament signed a provisional agreement in early December 2025 to formally phase out Russian gas imports. Aligned with a broader strategy to diversify imports and strengthen security of supply, the agreement stipulates a full prohibition on both LNG and pipeline\u2026","rel":"","context":"In \"African Energy Chamber\"","block_context":{"text":"African Energy Chamber","link":"https:\/\/www.oilnewskenya.com\/index.php\/tag\/african-energy-chamber\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.oilnewskenya.com\/wp-content\/uploads\/2025\/06\/FLNG-Gimi.jpg?fit=1024%2C682&ssl=1&resize=350%2C200","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.oilnewskenya.com\/wp-content\/uploads\/2025\/06\/FLNG-Gimi.jpg?fit=1024%2C682&ssl=1&resize=350%2C200 1x, https:\/\/i0.wp.com\/www.oilnewskenya.com\/wp-content\/uploads\/2025\/06\/FLNG-Gimi.jpg?fit=1024%2C682&ssl=1&resize=525%2C300 1.5x, https:\/\/i0.wp.com\/www.oilnewskenya.com\/wp-content\/uploads\/2025\/06\/FLNG-Gimi.jpg?fit=1024%2C682&ssl=1&resize=700%2C400 2x"},"classes":[]},{"id":7785,"url":"https:\/\/www.oilnewskenya.com\/index.php\/total-closes-the-acquisition-of-anadarkos-shareholding-in-mozambique-lng\/","url_meta":{"origin":1343,"position":4},"title":"Total Closes the Acquisition of Anadarko\u2019s Shareholding in Mozambique LNG","author":"","date":"October 1, 2019","format":false,"excerpt":"Total has announced the closing of the acquisition of Anadarko\u2019s 26.5% operated interest in the Mozambique LNG project for a purchase price of $ 3.9 billion. This closing comes after Total reached a binding agreement with Occidental on May 3, 2019, to acquire Anadarko\u2019s assets in Africa (Mozambique, Algeria, Ghana\u2026","rel":"","context":"In \"BPRL Ventures\"","block_context":{"text":"BPRL Ventures","link":"https:\/\/www.oilnewskenya.com\/index.php\/tag\/bprl-ventures\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.oilnewskenya.com\/wp-content\/uploads\/2019\/02\/anadarko-mozambique-lng-project.jpg?fit=664%2C400&ssl=1&resize=350%2C200","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.oilnewskenya.com\/wp-content\/uploads\/2019\/02\/anadarko-mozambique-lng-project.jpg?fit=664%2C400&ssl=1&resize=350%2C200 1x, https:\/\/i0.wp.com\/www.oilnewskenya.com\/wp-content\/uploads\/2019\/02\/anadarko-mozambique-lng-project.jpg?fit=664%2C400&ssl=1&resize=525%2C300 1.5x"},"classes":[]},{"id":1183,"url":"https:\/\/www.oilnewskenya.com\/index.php\/east-africa-lng-projects-likely-to-face-delays\/","url_meta":{"origin":1343,"position":5},"title":"East Africa LNG projects likely to face delays","author":"Samuel Kamau Mbote","date":"June 10, 2014","format":false,"excerpt":"LNG production in Tanzania and Mozambique along the East African coast is likely to face delays despite huge finds due to high cost of production, difficulty in access to financing partners as a result of low returns of natural gas. This is according to the director of projects and technology\u2026","rel":"","context":"In "Elsewhere in Africa"","block_context":{"text":"Elsewhere in Africa","link":"https:\/\/www.oilnewskenya.com\/index.php\/category\/elsewhere-in-africa\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.oilnewskenya.com\/wp-content\/uploads\/2014\/03\/anadarko.jpg?fit=400%2C300&ssl=1&resize=350%2C200","width":350,"height":200},"classes":[]}],"jetpack_sharing_enabled":true,"jetpack_likes_enabled":true,"_links":{"self":[{"href":"https:\/\/www.oilnewskenya.com\/index.php\/wp-json\/wp\/v2\/posts\/1343","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.oilnewskenya.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.oilnewskenya.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.oilnewskenya.com\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.oilnewskenya.com\/index.php\/wp-json\/wp\/v2\/comments?post=1343"}],"version-history":[{"count":1,"href":"https:\/\/www.oilnewskenya.com\/index.php\/wp-json\/wp\/v2\/posts\/1343\/revisions"}],"predecessor-version":[{"id":3679,"href":"https:\/\/www.oilnewskenya.com\/index.php\/wp-json\/wp\/v2\/posts\/1343\/revisions\/3679"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.oilnewskenya.com\/index.php\/wp-json\/wp\/v2\/media\/801"}],"wp:attachment":[{"href":"https:\/\/www.oilnewskenya.com\/index.php\/wp-json\/wp\/v2\/media?parent=1343"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.oilnewskenya.com\/index.php\/wp-json\/wp\/v2\/categories?post=1343"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.oilnewskenya.com\/index.php\/wp-json\/wp\/v2\/tags?post=1343"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}