It’s Time

What is the significance of the Area 1 gas reserves that Anadarko Moçambique Area 1 Lda (AMA1) is developing for Mozambique?

AMA1 has been exploring for oil and natural gas since early 2007. We made our first discovery in Offshore Area 1 in early 2010 and have been systematically appraising natural gas discoveries since then. We expect to be actively drilling until around the end of 3Q2014. We estimate Area 1’s recoverable natural gas resources in the range of 45 to 70 tcf, rendering them among the largest natural gas discoveries in the world over the past decade. In terms of global impact, we see LNG as the enabler of natural gas development here in Mozambique. AMA1’s initial phase envisages 10 million tons of LNG per annum, and we believe there are sufficient resources to support the development of 50 MMTPA in future years, which would rank Mozambique as the world’s third largest LNG exporter, as 50 million tons represents approximately 20% of current global demand. The scale here provides the ability for Mozambique to become a global player in LNG. Obviously, Mozambique is well positioned for the growing consumer markets in Asia. We have the scope to consider markets worldwide, although for this project we are focused on Asian markets. In terms of the benefits to be reaped by Mozambique itself, the project has the potential to fuel large-scale growth in terms of GDP, foreign exchange, and project revenues, in addition to developing a skilled workforce and infrastructure. It can provide money for the treasury to invest in education, healthcare, and other core areas of the state. Our contract with the government is mutually equitable, and involves significant tax revenues and royalties. The national oil company is also an equity participant in the project. The government has announced foreseeing other projects that could develop from natural gas-based feedstock, such as industrial schemes and power generation. AMA1 is supportive of initiatives that can also have significant economic impact on the country, on job creation, and on economic diversification.

What is the significance of this project for Anadarko’s global portfolio?

Globally, this will be the biggest single investment that Anadarko has ever embarked upon. We have just completed our third large-scale project in Algeria, which also involved many logistical and technical challenges, and so not unlike what is happening here. We are looking forward to moving into LNG. Anadarko is a world leader in deep-water developments, and we also have superlative project management skills that enable us to undertake large-scale projects such as LNG. Moving into that area offers significant growth potential for the company, not only in Africa, but also globally.

How have you tackled the logistics challenges of operating in remote areas in Northern Mozambique?

There are advantages to what we have in Palma, where the LNG facility is being developed, versus the challenges that the mining industry is facing in the interior of the country. We are located on the coast, which simplifies a number of things. We will certainly have to build marine offload facilities for our construction activities. Our seismic and drilling operations have been run out of Pemba for the past four to six years, which has worked well. Pemba has an international airport, which makes it easier to get people and goods there, although the city could receive further infrastructure development. The port of Pemba itself requires upgrading, and we are supporting government initiatives to do so. In Palma, we are going to partner with the government in developing infrastructure. This will include marine facilities, such as a jetty for LNG loading and the construction of docks, although these would have to be built anyway. The work is already ongoing. In terms of air transport, we have been using Mocimboa da Praia Airport, which is about 60 kilometers away from the site. Logistically, it is better to have the airport in the industrial area where we are going to develop the LNG component and to have some of the spinoff industries the government has in mind there. For this we will need to build a new airport in order to accommodate the volume of aircraft required to transport our equipment and the workforce needed at Palma.

How have Anadarko’s local content policies contributed to upgrading the capacity of Mozambican business?

Extractive industries in general, and certainly the oil and natural gas industry, are highly capital-intensive, but not particularly labor intensive. Though we will not require a significant number of people to operate the facilities, we will need a large number of people to build them. Most of the workers to be hired during construction will be sourced through the engineering, procurement, and construction contractors (EPCCs), and not directly from AMA1. In terms of SME development, we fully support what the government is trying to do. We held a supplier awareness workshop in Maputo last week where the Minister of Trade and Industry delivered a keynote speech. The idea is to support SMEs, which account for the majority of companies in Mozambique. Our work with SMEs is helpful for them because we will have the same requirements as the EPCCs and many other international companies. It is a process of education and we are working with the government to ensure that our project is of maximum benefit for those sectors. We fully understand the importance of this in terms of the largest support for further mega-projects. We have invested somewhere in the range of $15 million on SMEs as suppliers this year. We have approximately 100 local SMEs that we do, or have done, business with, and the number is growing. We are developing a database of suppliers that have been through our corporate due diligence process. The idea is certainly to maximize the use of local business.

What are the next steps moving toward the first LNG exports in 2018?

We have completed the public consultation and received feedback from technical groups interested in our project. We expect to receive our license to start building offshore infrastructure for the project in 2014. The other aspect is to complete our agreement with the government to facilitate the project, which is really all about putting in place the framework stability that we need for the buyers of LNG and the EPCCs themselves. The President announced in July 2013 that this would be done through a decree approved by parliament, which is exactly what projects like this need. That will determine the timing of the final investment decision and, with that, everything should be in place for delivery of the first cargo in 2018. The project is world class and the buyers of LNG will see it as a strategic source for the long term.