DBSA confirms financing of $120m for giant Mozambique LNG project

21st July 2020 By: Terence Creamer - Creamer Media Editor

DBSA confirms financing of $120m for giant Mozambique LNG project

South Africa’s State-owned Development Bank of Southern Africa (DBSA) has confirmed financing of $120-million for the $20-billion-plus liquefied natural gas (LNG) project being developed by a Total-led consortium in northern Mozambique.

On July 17, Total announced the signing of a $14.9-billion senior debt financing agreement for Mozambique LNG, revealing that the financing had been secured from eight export credit agencies, 19 commercial banks and development finance institutions.

The deal is the biggest-ever in Africa and has been closed despite rising concern over an increasingly aggressive insurgency in the Cabo Delgado province, where the project is located, as well as recent Covid-19-related delays and a sharp fall in gas prices and demand.

South African banking group Standard Bank confirmed last week that it would contribute $485-million in debt finance to the project, reporting that financing documents, confirming access to the senior debt, were signed on Tuesday, July 15.

The DBSA said in a statement that its portion of the funding would be used towards upstream and downstream project development activities required to extract natural gas offshore and bring it onshore for processing before conversion to LNG for export to various markets.

The onshore Mozambique LNG terminal will process gas mined from the Golfinho and Atum fields located within the offshore Area 1 resource in the Rovuma basin. It will consist of two LNG trains with a total yearly nameplate capacity of 13.1-million tons. The project has successfully secured in aggregate 11.1-million tons a year of long-term LNG sales with buyers in Asia and in Europe.

Area 1 forms part of a far larger gas resource, with about 150-trillion cubic feet of gas having been discovered offshore Mozambique in recent years, making it one of the largest gas discoveries worldwide and potentially positioning Mozambique as a significant new LNG market participant.

“The project will unlock significant opportunities across the continent to export gas as an alternative energy resource. With South African equipment suppliers and other service providers expected to play a significant role in the project, it will generate export earnings for South Africa,” DBSA group executive for deal origination and client coverage Mohan Vivekanandan said in a statement.

Project finance head Mpho Mokwele added that the project, with other similar initiatives in the Rovuma basin, could catalyse South Africa’s gas industrialisation aspirations and the implementation of gas-to-power projects.

Project consultancy Africa House, which has been tracking the gas developments in Mozambique for several years, will host a virtual event in early August to expose South African companies to the opportunities that are likely to arise directly from the mega-scale Mozambique LNG project, as well as various associated projects, ranging from a new airfield, to housing, roads, warehouses and offices.

A joint venture between McDermott, Saipem and Chiyoda, known as the CCS JV, has been appointed as the engineering, procurement, construction contractor for the project with a national-content mandate, which means that local content will be a key tender evaluation consideration for subcontractors.

“The gas sector has the potential to positively harness economic and social integration and cooperation between Southern African Development Community countries and adjoining regional economies in Africa,” DBSA head of coverage for SADC Davies Pwele said.

The DBSA, he noted, also had prior investments in the gas sector, including development support offered to Sasol Natural Gas, Société Nationale Petroleum du Congo (“SNPC”), Companiah Mozambican Hydrocarbonatoes and the Tema LNG Terminal, in Ghana.