Anadarko Corp
(
APC
) and Eni SpA of Italy are in talks to to build a
liquefied natural gas (
LNG
) plant in Mozambique as part of a plan to jointly develop their
recent major gas discoveries off the East African country's coast.
The two companies had independently discovered gas reserves in the
Rovuma Basin. Anadarko has given a high-end estimate of 100
trillion cubic feet for the gas reserves in its Rovuma find.
Recoverable gas reserves have been estimated as being anywhere
between 30-60 trillion cubic feet. The Anadarko discovery is
located close to another huge reserve found by Eni. The Italian
company says that it has discovered close to 70 trillion cubic feet
of gas in the region, of which 50 trillion cubic feet are part of
the same geological structure as the Anadarko discovery. ((
Anadarko in talks with ENI over Mozambique
plant
, Market Watch))
Click here for our full analysis of Anadarko
Corp
.
Importance Of Mozambique's Reserves
Many large natural gas discoveries have been made since late
2011 off the coasts of Mozambique, Tanzania, and most recently
Kenya. These have transformed East Africa into one of the world's
most promising energy provinces, so much so that the region may
emerge as a strong competitor to Qatar and Australia in the battle
to capture key export markets in Asia. However, before that can
happen, a huge challenge is to build facilities on land to
turn the reserves into liquefied natural gas, which can then be
shipped to markets. Anadarko plans to build two LNG plants in
Cabo Delgado in the first phase, each capable of processing five
million tonnes of gas a year. ((Mozambique: Anadarko Announces
Yet Another Major Gas Discovery, All Africa))
Anadarko has estimated the total cost of offshore development
and construction of a new two-train liquefied natural gas
terminal at $15 billion. According to the company, the target
is to begin construction in 2013 with the goal to bring the
resources to market in 2018. Once the gas reaches the market,
it will become a huge part of the Mozambican economy. In April,
Mozambique's Minister of Mineral Resources, Esperanca Bias, said
that natural gas is expected to eventually contribute around 13% to
the Gross Domestic Product (
GDP
) of the country.
Anadarko is the operator of Offshore Area 1 where these reserves
are located, and holds a 36.5% share of the fields. Its current
partners are Mitsui of Japan with a 20% stake, Bharat Petroleum
Corporation Limited and Videocon (both of India, with 10% stake
each) and Cove Energy of Britain (8.5%). The Mozambican
government is represented by its national oil company, Empresa
Nacional de Hidrocarbonetos, which holds a 15% stake in the fields.
The significance of the region's reserves was underlined in the
battle fought between Royal Dutch Shell and Thailand's PTT
Exploration and Production for the control of Cove Energy. PTT
eventually won and snapped up Cove for $1.9
billion. ((RPT-UPDATE 5-Thailand's PTT gets Cove Energy after
Shell drops bid, Reuters))
We recently revised our price estimate for Anadarko to $88,
which is about 20% ahead of its current market price. The revision
reflects the impact of the fall in commodity prices in 2012 and the
company's revised production outlook. We reduced our forecast for
the average price of natural gas, crude oil and Natural Gas Liquids
(
NGL
) to reflect the drop in prices as reported by Anadarko. The
company's capital expenditure forecast has also been adjusted to
reflect the change in the outlook for the industry.
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