Mozambique: Eni sees first offshore LNG cargo at end of third quarter

By David Whitehouse
Posted on Monday, 20 June 2022 09:20

The logo of Italian energy company Eni is seen at a gas station in Rome REUTERS/Alessandro Bianchi
The logo of Italian energy company Eni is seen at a gas station in Rome REUTERS/Alessandro Bianchi

Italian oil and gas major Eni sees a rapid scaling up of the production of floating liquid natural gas (LNG) offshore Mozambique after the start of output at the end of the third quarter, the company’s director upstream Luca Vignati tells The Africa Report.

Eni’s fully operated Coral South project is “fully on time” and there will “absolutely” be a quick ramp up in 2023 to a production plateau of 3.5m tons of LNG per year, Vignati says at the Africa CEO Forum in Abidjan. Europe is “an attractive market” where the LNG might be sold, he says.

The project is the first floating LNG facility to be deployed in deep waters offshore Africa, and only the third of its kind in the world. It uses a single vessel roughly 400 metres by 45 metres which Vignati compares to a small village. He hopes its successful deployment will lead to further projects for Eni offshore Mozambique. “This model can be cut and pasted elsewhere,” Vignati says. “That’s the message we are passing to the authorities.”

The start of production will be a “significant statement for Mozambique,” and the country will benefit through profit sharing, employment and human capital development, Vignati says.

  • He’s confident the company can manage the impact of rising input prices triggered by the Russia-Ukraine war. There has been a gradual decline in the price of steel, the largest input.
  • Vignati says that the costs of the company’s second floating LNG vessel will be broadly in line with that of the first, and that building it will be a smoother process.
  • The company is likely to have a better idea of prospects offshore Mozambique by the end of 2022,  Vignati says.

LNG emissions

Onshore LNG production in northern Mozambique has been delayed both by Covid-19 and by an Islamic extremist insurgency which the government was not able to deal with alone. Rwandan troops were deployed in July 2021 to help bring the situation under control. Security onshore “has improved a lot”, Vignati says, adding there’s no way of knowing when the force majeure imposed by the project leader TotalEnergies will be listed.

Still, analysts such as Louw Nel at Oxford Economics have cautioned that the insurgents have proved adept in conducting asymmetrical warfare and that they may retain the capacity to wear down the relatively small international deployment.

The theme of energy transition has moved up the agendas of African governments over the last six to eight months, Vignati says. The continent’s governments “have to play and will play a major role. They are not on the sidelines, but on the mainline.”

Though it is a fossil fuel, LNG is often presented as being a key part of a global transition to renewable energy sources. Yet scientists such as Robert Howarth at Cornell University in the US have shown that, though gas emits less carbon dioxide than coal at the point of combustion, satellite and aerial assessments show that overall greenhouse emissions are higher as LNG gives off methane throughout its lifecycle.

  • The kind of plant used to produce LNG determines the amounts of emissions, Vignati says. He’s optimistic that future technological advances will drive emissions levels down.

Bottom line

Eni is confident that its floating LNG technology is a low-risk way to exploit Africa’s offshore gas reserves.

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