Anadarko Petroleum Corp approves $20 billion for Mozambique LNG export project

Following Occidental Petroleum Corp acquisition of Anadarko, the Mozambique LNG project will be sold to French energy major Total SA.

In what is slated to be Africa’s single biggest LNG project, U.S. energy Anadarko Petroleum Corp stated, it has approved the construction of a $20 billion gas liquefaction and export terminal in Mozambique.

“As the world increasingly seeks cleaner forms of energy, the Anadarko-led Area 1 Mozambique LNG project is ideally located to meet growing demand, particularly in expanding Asian and European markets,” said Al Walker, Anadarko’s Chief Executive Officer in a statement.

Incidentally, Anadarko has agreed to be acquired by Occidental Petroleum Corp. Once this deal goes through, Occidental has agreed to sell assets, including the Mozambique LNG project, to French oil major and large LNG trader Total SA.

Total SA did not immediately respond to requests for comments.

The project has already drawn commitments from long-term supplies to utilities, major LNG portfolio holders and state companies across the globe; the project underscores the energy industry’s conviction that demand for LNG will soar in the coming years, despite a current slump in prices.

Low prices for LNG, that is super0cooled for transportation, have prompted fears that final investment decisions (FIDs) such as Anadarko’s could be delayed or scrapped. But the U.S. company has attracted sufficient long-term buyers to make the financing of the project viable.

“Flexible commercial arrangements, including an innovative co-purchase agreement with Tokyo Gas and Centrica, have been instrumental in securing the project a roster of high-quality customers in a crowded LNG market,” said Frank Harris, head of LNG Consulting at Wood Mackenzie.

The price of LNG dipped this year, since the jump in supply from new terminals in the U.S., Australia and Russia, did not match the demand from Asia. Further, trade in LNG is far from being developed, like crude oil, which has caused erratic price movements.

“At $20 billion, today’s FID is the largest sanction ever in sub-Saharan Africa oil and gas,” said Jon Lawrence, an analyst with Wood Mackenzie’s sub-Saharan Africa upstream team.

Anadarko’s partners in the Mozambique LNG project are Mozambique state energy company ENH, Mitsui, Thailand’s PTT and Indian energy firms ONGC, Bharat Petroleum Resources and Oil India.

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