Tough market conditions failed to stop some companies, led by ExxonMobil Corp. (NYSE: XOM) and partner Rosneft, from successfully bidding on blocks offshore Mozambique.

The duo, with ExxonMobil as operator, was the winner of three offshore blocks—two in the Zambezi Delta, the other in the Angoche Basin—offered during Mozambique’s fifth oil and gas round issued by the Institute of National Petroleum (INP).

The bidding round results were delivered Oct. 28 as oil and gas companies continued releasing third-quarter earnings reports, bringing more news of falling profits, lower costs, capex cuts, efficiency gains and value focus amid commodity price volatility and a supply-demand imbalance.

But the outcome shows some companies are still willing to spend money on exploration, and others are pushing forward with megaprojects such as Anadarko Petroleum’s Mozambique LNG project in Offshore Area 1.

“Despite the current low oil price, the bids received for all the areas awarded have very significant technical work programs indicating Mozambique’s significant hydrocarbon potential,” INP said in a statement.

Interest remains in Mozambique, which has blossomed following the discovery of prolific gas finds in the Rovuma Basin since 2010. U.S. Energy Information Administration estimates show that the south African country with a population of more than 25 million has about 100 trillion cubic feet of proved natural gas reserves. Only Nigeria and Algeria are believed to hold more on the continent.

interest-remains-offshore-onshore-01In all, 15 blocks spanning about 74,259 sq km were made available offshore in the Rovuma, Angoche and Zambezi areas and onshore in the Palmeria and Pande-Temane areas. Eight blocks received bids.

Successful bidders also included ENI with partners Sasol Petroleum and Statoil, winning a block in the Angoche area. Sasol Petroleum also was the high bidder for a block onshore in the Pande/Temane area, while Delonex Energy Ltd. and partner Indian Oil Corp. won one block in Palmeira area.

In a statement, Rosneft said it faced strong competition from other supermajors.

“The global partnership of Rosneft and ExxonMobil is of a strategic nature. The companies have a proven track record of highly successful cooperation internationally and at the Sakhalin-1 project in Russia,” said Rosneft, the world’s top oil producer. “This result marks a serious achievement for Rosneft and ExxonMobil.”

Companies declared winners will now enter negotiations with Mozambique and the INP on participation specifics.

Mozambique anticipates the companies will spend more than $691 million over the next four years, the first exploration period. During this time, at least 10 wells will be drilled, including eight deepwater wells; more than 3,000 km of 2-D and 18,400 sq km of 3-D seismic data will be acquired; and about 10,000 sq km of full-tensor gravity data will be gathered, according to INP. In addition, the companies’ plans include other geotechnical studies and high-resolution magnetics programs.

interest-remains-offshore-onshore-02ENI and Anadarko are already among the companies leading exploration and development offshore Mozambique’s Rovuma Basin with major LNG projects. Anadarko has drilled more than 40 deepwater wells in Offshore Area 1, discovering more than 75 Tcf of recoverable natural gas. Company executives updated the progress of its Mozambique LNG project during a conference call Oct. 28.

“We’re in the market with procurement regarding the subsea equipment, the infrastructure, the offshore pipe order lay vessels to put everything in place for the offshore development,” said Robert Daniels, Anadarko’s executive vice president of international and deepwater exploration.

For the onshore liquefaction development, the company has gone to FEED tender, and competition in the marketplace has resulted in costs coming in better than originally expected, he said.

Source: Anadarko Petroleum Corp

Source: Anadarko Petroleum Corp

Anadarko President and CEO Al Walker added that the company thinks it will now build a two-train, 12 million ton per annum facility instead of a two-train 10 million ton per annum facility. Hopes are for the company to bring Mozambique LNG into the market by the end of this decade; however, a final investment decision has not been made.

Currently, the company is working with the government on the remaining agreements and approvals needed to support the development. In addition, Area 1 participants are preparing to select the offshore EPCI contractor and submit the development plan to the government, Anadarko said.

Citing a study by Standard Bank, Anadarko said Mozambique LNG could create 15,000 direct jobs and 685,000 indirect jobs, generating about $39 billion for Mozambique’s economy annually.

Reuters reported that Mozambican officials anticipate more than $30 billion will be invested initially in the natural gas sector to build capacity to produce 20 million tonnes per year of LNG. Exports are expected to start in 2018.

Mozambique plans to have another bidding round in 2017.

Author: Velda Addison