Italian oil company Eni has won its approval from the Mozambique government to build its planned Coral floating liquefied natural gas (LNG) plant.
The company, is targeting to sell all the LNG from the plant to British oil company BP. It is expected to make a final investment decision (FID) this year but has now overcome one of the biggest hurdles.
Development of major natural gas projects has decelerated globally as liquefied natural gas (LNG) prices have plunged alongside the oil prices, prompting many companies to delay funding decisions until the business environment improves.
However, Eni is progressing its LNG project in Mozambique despite the added challenge of using a relatively untested technology to ship the gas.Its floating LNG (FLNG) export plant will be moored above the Coral gas field, containing 5 trillion cubic feet (tcf) of gas, in resource-rich waters off Mozambique.
Mozambique is hopeful to fuel future prosperity with the returns gained from an estimated 180 trillion cubic feet of offshore gas.
Eni’s intends to drill six subsea wells and install a floating LNG (FLNG) facility with a capacity of around 3.4 million tonnes per year. Mozambique’s LNG rival Tanzania has struggled to match Mozambique’s pace of progress in getting its own nascent industry off the ground, which has been constrained by regulatory uncertainty and other factors.
LNG prices are around a quarter of what they were two years ago as a wave of new supply has overcome demand growth, depressing the market, with yet more supply on the horizon as the United States starts exporting.
Claudio Descalzi, Eni’s CEO said the approval of the Coral POD was a historical milestone for the development of the group’s discovery of 85 trillion cubic feet of gas in the Rovuma Basin.
“It is a fundamental step to progress toward the final investment decision of our project which envisages the installation of the first newly built FLNG facility in Africa and one of the first in the world,” Descalzi said.
Eni is the operator of Area 4 with a 50 percent indirect stake owned through Eni East Africa which in turn holds 70 percent of the Area.
U.S. energy company Anadarko Petroleum also plans to build an onshore LNG export scheme in Mozambique, but is expected to lag Eni’s project.