India’s hopes for liquified natural gas (LNG) supplies from the ambitious $20 billion Mozambique project have been further delayed. The progress of the Rovuma Offshore Area 1 project, once considered a vital source of clean fuel for India’s growing energy needs, is now expected to hinge on the outcome of the upcoming presidential elections in Mozambique on October 9th.
This long-delayed project, in which an Indian consortium led by ONGC Videsh Ltd (OVL) holds a 30% stake, has faced numerous setbacks. Operations were suspended in April 2021 following attacks by Islamic State terrorists, leading to a force majeure declaration. The project represents a significant investment for Indian companies, with OVL, Bharat Petroleum Corp. Ltd’s Bharat PetroResources Ltd (BPRL), and Oil India Ltd (OIL) having collectively invested around $8 billion.
The consortium’s stake in the project, the largest gas discovery in offshore East Africa, includes $5.185 billion for acquiring shares. OVL and OIL jointly purchased a 10% stake from Videocon Mauritius Energy Ltd for $2.47 billion, while OVL acquired Anadarko Petroleum Corp.’s 10% stake for $2.64 billion. BPRL also acquired a 10% stake from Anadarko Petroleum for $75 million. Additional investments were made for project development, including cash calls met by the consortium, further increasing their overall investment in the gas project.
The project, operated by France’s TotalEnergies with a 26.5% stake, has seen other partners join, including Japan’s Mitsui & Co. (20%), Mozambique’s state-run Empresa Nacional de Hidrocarbonetos or ENH (15%), and Thailand’s PTT Exploration and Production Plc. or PTTEP (8.5%). BPRL, OIL, and OIL hold 16%, 10%, and 4% stakes, respectively.
While initial production from the Rovuma basin was scheduled for 2018, with India expecting its first LNG consignment by 2019, the project’s timeline has been significantly impacted.
“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,” an Indian government official said, requesting anonymity.
The importance of the Mozambique project to India’s energy security is underscored by the high-level visits it has received. In April 2022, India’s external affairs minister S. Jaishankar visited Mozambique, the first visit by an Indian foreign minister since 2010. This visit was followed by a visit from India’s petroleum and natural gas minister Hardeep Singh Puri in October 2022, who met with Mozambique’s minister of mineral resources and energy Carlos Zacarias.
TotalEnergies has acknowledged the upcoming presidential elections in Mozambique and their significance for the LNG project. Patrick Pouyanné, chairman and CEO of TotalEnergies, highlighted this during a July investor call.
“The project is still under force majeure,” said a TotalEnergies spokesperson. “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.”
“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,” added the TotalEnergies spokesperson.
India, a net importer of natural gas, relies on imports for 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, reaching 23.5 mmtpa.
India has been actively seeking long-term LNG contracts in response to market volatility, particularly following the Russia-Ukraine war in 2022. India is currently in talks with Equinor to secure long-term LNG deals from its portfolio in the US and Qatar. Earlier this year, state-run Indian Oil Corp. signed a long-term LNG contract with TotalEnergies for the supply of 1 mmtpa of LNG for a period of 10 years. Additionally, India has plans to sign a long-term LNG deal with state-run Abu Dhabi National Oil Co (Adnoc) to purchase one million metric tonnes per annum (mmtpa) of clean fuel. Petronet LNG has also extended its contract with QatarEnergy LNG through a long-term deal to purchase 7.5 million tonnes of LNG per annum.
The future of the Mozambique LNG project and its potential contribution to India’s energy security remains uncertain, heavily dependent on the outcome of the upcoming presidential elections in Mozambique.
