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India’s wait for Mozambique LNG gets longer, at stake $8 bn investment
Summary
- Rovuma Offshore Area 1 project, once tipped as the panacea for India’s growing clean fuel needs, has been a disappointment so far. The long-delayed project in which an ONGC Videsh Ltd (OVL)-led Indian consortium has a 30% stake has been beset with difficulties.
India’s wait for liquified natural gas (LNG) supplies from the marquee $20 billion Mozambique project has lengthened, with any progress expected only after a new government is formed in the East African country after its presidential elections on 9 October, two people aware of the development said.
Rovuma Offshore Area 1 project, once tipped as the panacea for India’s growing clean fuel needs, has been a disappointment so far. The long-delayed project in which an ONGC Videsh Ltd (OVL)-led Indian consortium has a 30% stake has been beset with difficulties, with the suspension of operations following attacks by Islamic State terrorists in April 2021, after which force majeure was declared.
Big stake
At stake is around $8 billion investment made by OVL, Bharat Petroleum Corp. Ltd’s Bharat PetroResources Ltd (BPRL) and Oil India Ltd (OIL), including around $5.185 billion for buying stakes in the largest gas discovery in offshore East Africa. While OVL and OIL jointly bought 10% stake from Videocon Mauritius Energy Ltd for $2.47 billion, OVL bought US-based Anadarko Petroleum Corp.’s 10% stake for $2.64 billion. Also, BPRL bought 10% stake from Anadarko Petroleum for $75 million. Apart from this, additional investments were made to develop the project.
“Apart from what was paid at the time of acquisition of the stakes by Indian state-run firms, there have also been cash calls that have been met, thereby upping the overall investment in the gas project. There are concerns around the project," said one of the two people cited above, requesting anonymity.
OVL, BPRL and OIL hold 16%, 10% and 4% stake respectively in the project, operated by France's TotalEnergies with a 26.5% stake. The other partners are Japan’s Mitsui & Co. (20%), Mozambique’ state-run Empresa Nacional de Hidrocarbonetos or ENH (15%) and Thailand’s PTT Exploration and Production Plc. or PTTEP (8.5%). With the production from Rovuma basin originally slated to start in 2018, India was to get its first LNG consignment from Mozambique by 2019.
Force majeure in place
“TotalEnergies is the operator for Rovuma Area-1 Offshore Mozambique (Area-1) block, where force majeure is in place. Once the force majeure is lifted, the production can start immediately. This is no problem with the asset quality per se. This asset has seen the biggest gas discovery in the recent past," said an Indian government official, requesting anonymity.
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The importance of the Mozambique project in India’s energy security stratagem can be gauged from the fact that external affairs minister S. Jaishankar visited the African country in April last year, becoming the first Indian foreign minister to visit it since 2010. This was followed by a visit of India’s petroleum and natural gas minister Hardeep Singh Puri in October last year, when he met Mozambique’s minister of mineral resources and energy Carlos Zacarias.
A Mitsui & Co spokesperson in an emailed response said, “We are not in the position to answer to your inquiries. Please ask TotalEnergies, the operator or Indian companies."
Presidential elections flagged
TotalEnergies has also flagged the impending Presidential elections in Mozambique and its importance for the LNG project, as articulated by its chairman and CEO Patrick Pouyanné in a July investor call.
A TotalEnergies spokesperson in an emailed response said, "The project is still under force majeure," and added, “But for more details, please refer to our CEO last call with investors end of July: On Mozambique, I can tell you that everything has been settled with the contractors. So we are clear: we know where we are. In fact, it was more a matter, to be honest, of the cost of the frozen period, which was to be absorbed and discussed, because between 2020 to 2024, we have frozen some works. We have some equipment which was kept in different locations. All that has been discussed, all that is settled with them. And so, we are on the way to move forward. As soon as we can update you, we will do it. But the progress has been done in many directions, including on security."
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"Now, we try to regroup all the financers around the project. As you know as well, there are some presidential elections in Mozambique coming soon. And so of course, for us, it’s important to have the confirmation that the new President will follow the same policy regarding these large projects. That’s where we are. So say, by end of the year, we should clarify how we should be able to move forward," the TotalEnergies spokesperson added.
An OVL spokesperson declined comment.
Net importer of gas
India is a net importer of natural gas, and imports about 55% of its total gas requirement. According to the Petroleum Planning and Analysis Cell (PPAC), India’s LNG imports increased 17.5% year-on-year in FY24 in terms of volumes to 23.5 mmtpa.
Queries emailed to the spokespersons of BPCL, OIL, ENH, PTTEP, Mozambique High Commission in New Delhi, and India’s ministries of petroleum and natural gas; and external affairs on Tuesday late night remained unanswered till press time.
Mint earlier reported about TotalEnergies making efforts to resume operations at the plant. In February, CEO Pouyanne visited Mozambique's Cabo Delgado to review the security and humanitarian situation in the country.
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India has been aggressively scouting for long-term LNG contracts after the gas market witnessed volatility in 2022 following the Russia-Ukraine war, which led to the failure of Russian government-owned Gazprom, the world’s largest explorer of natural gas, to honour the terms of a deal to supply LNG to state-run GAIL (India) Ltd.
As part of this new playbook, India is in talks with Equinor for securing long-term LNG deals from its portfolio in the US and Qatar, as reported by Mint earlier. Also, state run Indian Oil Corp. earlier signed a long-term LNG contract with TotalEnergies for supply of 1 mmtpa of LNG to IOCL for a period of around 10 years, with plans in the work to sign a long-term LNG deal to buy one million metric tonnes per annum (mmtpa) of clean fuel from state run Abu Dhabi National Oil Co (Adnoc). Petronet LNG also extended its contract with QatarEnergy LNG by signing a long-term deal for buying 7.5 million tonnes of LNG per annum.
