Italy's Eni signs LNG deal in Mozambique, raising hopes of gas boom

Andrew Cummings
June 3, 2017

KOGAS will take part in the project as a gas field operator, Samsung Heavy Industries as a major contractor for a large FLNG (about US$2.5 billion) and the Export-Import Bank of Korea (US$1 billion) and the Korea Trade Insurance Corporation (US$800 million) as PF providers.

Alasdair Reid, a regional research manager for consultant firm Wood Mackenzie, said the LNG project marks a first for deepwater developments and could generate more than $1.5 billion, before taxes, for the next 25 years.

Overcoming hard market conditions, Eni signed contracts and inked regulatory and financial agreements June 1 to pave a clear path toward development of the Coral South floating LNG (FLNG) project offshore Mozambique.

"We believe investors remain skeptical about the returns on the Coral FLNG project, with the vessel alone set to cost around $4.5 billion and $5 billion", he said in an emailed report. In October 2016, Eni and its Area 4 partners signed an agreement with BP for the sale of the entire volumes of LNG produced by the Coral South project for a period of over 20 years.

Partners in the field development include China National Petroleum Co (CNPC), Korea Gas Corp (Kogas) and Mozambique's state-run Empresa Nacional de Hidrocarbonetos (ENH). "LNG project sanctions over the last two years have been few and far between", it said.

The Coral field, discovered in May 2012, is located in Mozambique Area 4 and has 450bn ft of gas in place (16 trillion ft) of gas in place, said Eni. "With FID out of the way, the project is now on track for first LNG production in 2022". "With global activity levels and costs low, now is a good time to add new capacity, even if the LNG market does presently look oversupplied. With stranded gas resources suited to FLNG elsewhere in Africa, Mozambique offers Eni an ideal regime to test this new approach".

Coral FLNG SA is a special objective entity incorporated in Mozambique, owner of the FLNG facility and jointly owned by Eni Mozambique LNG Holding BV, CNODC Mozambique BV, ENH FLNG UM, Galp Energia Rovuma BV, and KG Mozambique Ltd.

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