London, England —18 April 2013 – Asian state-owned oil companies are making inroads in the contest for East Africa’s energy reserves, gaining power in export projects that Western explorers like Royal Dutch Shell plc used to dominate.
Fields off Mozambique’s Indian Ocean coast are estimated to hold enough gas to meet global demand for two years, a prize that persuaded state-owned China National Petroleum Corporation to make its biggest foreign investment, reports Bloomberg News.
The Beijing-based company agreed to pay Italy’s Eni SpA US$4.2 billion last month for a share in the fields and a planned liquefied natural gas plant. While it’s the first time Asia’s state producers have participated in an African LNG project, companies from China, India, South Korea and Thailand now hold 24%.
State producers “have a national interest initiative to secure significant gas reserves and they can’t ignore a reserve of this size,” said Brett Olsher, the global co-head of natural resources at Goldman Sachs Group Incorporated. “Unlike in a number of LNG projects, in Mozambique there isn’t one dominant super-major, which provides an opportunity for national oil companies.”
Mozambique, Tanzania and Uganda are at the stage where power over natural resources in developing nations is shifting from traditional managers like Shell and Exxon Mobil Corporation toward state oil companies such as CNPC and Thailand’s PTT Production & Exploration pcl. They answer to Asian governments that need to fuel economies growing at at least twice the Western average.
LNG plants need billions of dollars in investment before they can start chilling gas into a liquid and load it on tankers for export. Western competitors like Shell, the world’s largest LNG trader, are now operating in a more crowded gas market. That makes it harder to secure participation in projects that can offer decades of profits.
Eni and Anadarko Petroleum Corporation, the two companies leading the project, plan four production units in Mozambique with a total capacity of 20Mtpa, making it the world’s second-largest export site behind Ras Laffan in Qatar, where Exxon Mobil Corporation is a partner.
As things stand, Mozambique would be the biggest LNG project without the participation of one of the so-called super-majors: Exxon, Shell, BP plc, Chevron Corporation and Total SA. Even so, Western investor-owned companies have proved a better investment in the past year, as they’re less likely to sell fuels at a loss in their home markets.
China’s state-owned Cnooc Limited (883) became an equal partner with France’s Total SA and Tullow Oil plc of the U.K. last year in a group developing oil fields in Uganda. In Tanzania, where Chinese President Xi Jinping visited last month, the Export-Import Bank of China is lending US$1.2 billion to build a natural- gas pipeline.
Mozambique may have 250 trillion cubic feet of gas reserves, according to Empresa Nacional de Hidrocarbonetos, the country’s state-backed petroleum exploration company that’s a shareholder in the fields.
Eni, Europe’s No. 5 producer, is the largest non-Asian company in Mozambique’s proposed LNG project. Bangkok-based PTT outbid Shell last year for chunk of the asset. Bharat Petroleum, 54% owned by India’s government, and Korea Gas Company are also shareholders.
Asia consumes more LNG than any other region and faster-growing economies are eager to secure future energy supplies, giving their state-backed companies a strategic imperative to make deals in Mozambique. Owning the producing assets is a natural hedge against rising LNG prices for energy importers.
And there could be room for more state-run Asian investors. Mozambique’s gas finds to date have been made in two offshore blocks: Area 4, led by Italy’s Eni, and Area 1, where Woodlands, Texas-based Anadarko is the lead shareholder. The two blocks will be combined for the LNG project.
Anadarko is seeking buyers for a 10% stake in Area 1 alongside an equivalent sale by Indian media group Videocon Industries Limited. Among bidders for that stake, like Shell, are India’s Oil & Natural Gas Corporation and Oil India Limited, both state-run energy companies.
Source: Bloomberg News. For more information, click here.