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Shell Still Interested in Mozambique Gas Bonanza

Published October 18, 2012

Dow Jones Newswires

Royal Dutch Shell PLC (RDSB.LN) is still interested in entering Mozambique despite losing out on a deal earlier this year that would have given the oil major access to East Africa’s huge gas reserves, Shell’s exploration chief, Andy Brown, said in an interview.

Large natural gas discoveries off the coasts of Mozambique, Tanzania and Kenya have transformed East Africa into one of the world’s most promising energy provinces, potentially challenging Qatar and Australia for key gas export markets in Asia.

The gas finds have already led to jostling between companies eager to get access to the region, where they would join Houston oil company Anadarko Petroleum Corp. (APC) and Italy’s Eni SpA (E, ENI.MI), both of which have already made significant discoveries.

“East Africa is going to be a big province for LNG. We think they still need a company that can develop LNG and the associated shipping and marketing,” said Mr. Brown, referring to an exportable form of natural gas, which is supercooled into a liquid form that can be shipped around the world.

“So we’re still interested in Mozambique,” he said, but declined to elaborate further.

His comments come amid renewed speculation about Eni’s future plans for its own 70% stake in an offshore block in Mozambique. While early indications suggest the license area could hold up to 70 trillion cubic feet of natural gas, analysts have suggested that the Italian major could seek to sell some of its share.

Eni, which lacks the kind of LNG track record boasted by Shell, Total SA (TOT, FP.FR) or BG Group PLC (BRGYY, BG.LN), has also hinted that it would be open to potential joint ventures in this area.

“Shell could be a wonderful partner,” said Claudio Descalzi, Eni’s head of exploration and production. However, Mr. Descalzi, who was speaking in London last week, stressed that his company hadn’t yet had formal talks with any other firms.

The Anglo-Dutch giant, which this year produced more gas than oil, is the world’s biggest shipper of LNG and has extensive experience in developing the giant cooling systems needed to manufacture the fuel. It is also developing Prelude, the world’s first vessel that will produce LNG aboard, known as floating LNG. It announced this week that major construction on the Prelude facility had begun.

FLNG technology is expected to revolutionize the industry as it removes the need to build multi-billion dollar onshore infrastructure and allows Shell to access offshore gas fields that would otherwise be too costly on difficult to develop.

Earlier this year, Shell tried to access Mozambique gas but was outbid by Thailand’s PTT Exploration and Production PCL (PTTEP.TH) in its attempt to take over Cove Energy PLC which had a stake in offshore Mozambique.

“We weren’t prepared to get into a bidding war that would basically destroy any potential future value by setting too high an entry price,” Mr. Brown said.

He added that the lack of basic infrastructure in Mozambique was a major challenge.

“Getting the momentum to develop all of that will take time,” he said.

Write to Selina Williams at [email protected]

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