Anadarko discussing Mozambique LNG supply with Chinese buyers

JOHANNESBURG (Bloomberg) -- Anadarko Petroleum is in talks to sate China’s increasing appetite for liquefied natural gas from its planned development in Mozambique.

It’s in discussions with “a variety of Chinese counterparts including national oil companies and emerging independent LNG buyers,” Anadarko said. Increasing consumption makes China “a long-term strategic market for the Anadarko-led Mozambique LNG project.”

China’s record-breaking gas demand could help spur investment decisions on projects to export LNG from East Africa, according to Emma Richards, a senior oil and gas analyst for BMI Research. LNG prices were buoyed as Chinese imports rose almost 50% in the first 10 months of 2017, making it the world’s third-largest buyer after Japan and South Korea, according to data compiled by Bloomberg New Energy Finance.

While Eni SpA has signed off on its $7 billion floating Coral project in Mozambique, Anadarko needs more sales and purchase agreements to justify a final investment decision on its own development in the north of the country. Anadarko has already lined up SPAs for about 2.6 million tons a year of the more than 8 million tons it’s targeting.

“Mozambique’s favorable central geographic location means the country is well positioned to meet the needs of customers in the Atlantic market and Asia-Pacific markets, in particular tapping into the growing demand for energy in China,” Anadarko said in an emailed response to questions.

Chinese demand would also temper the impact of the U.S. shale gas boom that has weighed on prices, said Richards of BMI.

“China could play a role in making that glut a little shallower,” Richards said in a phone interview. “If you do have China coming into the market more strongly, looking to take up more volumes, then yes, certainly that would help the operators in Mozambique and Tanzania locking in those SPAs, getting the financing in place, and moving the projects forward to development.”

Onshore facilities to chill the fuel from discoveries off northern Mozambique were initially targeted to reach production this year. BP Plc signed a 20-year contract in 2016 to buy all the LNG from Eni’s Coral project. Last year, Exxon Mobil Corp. bought 25% of another of the Italian explorer’s developments in the African nation and will lead the construction and operation of its onshore facilities.

A decision over Tanzania’s proposed onshore LNG project is likely years away. Operators such as Statoil have highlighted the country’s need for the completion of laws related to the sector.