Out-Law News 2 min. read
08 Jun 2017, 11:06 am
Eni said it has now signed “all the drilling, construction and installation contracts for the production facilities”, in addition to agreements with the Mozambican government for the regulatory framework and financing of the major investment project.
Eni did not give details of the financing arrangements, but said “the achievement comes just three years since the drilling of the final exploration well in a country that is a newcomer to the global gas market”.
Coral South is the first project in the development of what Eni has said are “the considerable gas resources” it discovered in Area 4 of the Rovuma Basin.
Eni said its floating LNG (FLNG) unit for the project will be the first such unit in Africa and only the third globally. The construction of the FLNG facilities will be financed through project finance covering around 60% of its entire cost, Eni said. “This is the first project finance ever arranged in the world for a liquefaction floater. The financing agreement has been subscribed by 15 major international banks and guaranteed by five export credit agencies.”
The Coral field, which was discovered in May 2012, is located within Area 4 and contains approximately 450 billion cubic metres of gas in place, according to Eni. In October 2016, Eni and its Area 4 partners signed an agreement with BP for the sale of the entire volumes of LNG produced by the Coral South project for a period of more than 20 years.
Eni chief executive officer Claudio Descalzi said: “As the world transitions to a low-carbon energy mix, Eni believes that the use of gas is critical to achieving a more sustainable future. Our ambition to become a global integrated gas and LNG player is based on working alongside key partners such as Mozambique.”
“The Coral South project will deliver a reliable source of energy while contributing to Mozambique’s economic development,” Descalzi said. “This partnership approach with our hosting countries is the foundation on which our joint sustainable growth strategy is built.”
Research manager for southern and east Africa at analysts Wood Mackenzie, Alasdair Reid, was quoted by Bloomberg as saying the initiative showed “despite ongoing credit issues, there is still enough belief in the investment climate for partners to raise finance and move projects forward”.
Eni is the operator of Area 4 (1-page / 72KB PDF), through its participation in Eni East Africa (EEA), which holds a 70 percent participating interest in the concession while Portugal’s Galp Energia, South Korea’s Kogas and Mozambique’s Empresa Nacional de Hidrocarbonetos, each hold a 10 percent stake.
Eni holds 71.4 percent shares of EEA with China’s CNPC holding 28.6 percent. Last March, ExxonMobil and Eni signed a sale and purchase agreement (3-page / 52KB PDF) to enable ExxonMobil to acquire from Eni a 25 percent indirect interest in Area 4, subject to regulatory and other approvals.
The African Development Bank said last year that a new ‘green economy investment fund’, supported by levies on the extractive industries, could help Mozambique boost investment in vital infrastructure projects. The proposed fund was part of a package of recommendations made in the bank’s ‘Transition Towards Green Growth in Mozambique’ report (76-page / 3.55 MB PDF), aimed at supporting sustainable development goals under the country’s ‘Green Economy Action Plan’.
The bank’s report said that, since the discovery in 2009 of the “world class reserves of first coal and later natural gas, Mozambique’s attractiveness to foreign investors prompted several billion dollars of foreign direct investment from the world’s largest mining and oil companies from South Africa, Australia, Brazil, the US, Italy and, more recently, China”. However, Mozambique “lacks the ability to exploit these resources fully and ensure equitable and sustainable access for the majority of the population”, the report said.
