KOLKATA (miningweekly.com) – Mozambique’s Rovuma Area 1 gas project, in which India government-owned oil and gas companies hold a 30% stake, has been hit by an investment drought.
The start of production from the fields had become uncertain too with no binding agreement from prospective liquefied natural gas (LNG) buyers, as few were willing to enter into long-term contracts in the falling oil and gas pricing environment.
Two India government officials have pointed out that about $6-billion had already been invested in the Rovuma Area 1 gas assets and that a further $25-billion would be required to bring the asset into production.
However, considering that gas purchase agreements have not been signed, major stakeholders were unwilling to make a final investment decision as the project’s projected cash flow could not be determined, the officials added.
While neither official was willing to risk a guess on when commercial production from Rovuma would start, both agreed that it would not be before 2021/22, and that too was subject to the revival of oil and gas prices and finding buyers for LNG from the project.
When the Indian oil and gas companies first started investing in Rovuma, they had forecast that production would start in 2018. However, the Indian officials said that, even if one offtake contract was clinched by end of the current financial year, production would not be possible before 2021/22.
It was pointed out that Rovuma was just one of the several stalled LNG projects across the world, falling victim to the downturn in oil and gas prices.
Delayed development at Rovuma was negative for bilateral relations between Mozambique and India. It was also considered a setback for the Asian country’s attempt to secure a bigger footprint in the African hydrocarbon sector.
ONGC Videsh, the overseas arm of national exploration and production major ONGC Limited, Oil India Limited and oil refiner-marketer Bharat Petroleum Corporation Limited together held a 30% stake in Rovuma Area 1. The companies acquired the stake from Indian firm Videocon and Anadarko Petroleum Corporation, when Anadarko partially divested a 10% stake. Anadarko continued to be lead operator of the block, which was believed to have reserves ranging between 35-trillion and 65-trillion cubic feet of gas.
One Indian official said that assured offtake from Rovuma by Indian gas importers was one of the options to monetise development of the gas field, but acknowledged that “reconciling sovereign interests” of exporting and importing nations would be a challenge in depressed oil and gas price regimes.