ExxonMobil’s decision to slash capital expenditure this year by 30% has pushed back a final investment decision (FID) on the Rovuma LNG project, in Mozambique.
The expectation had been that this would get the nod in 2020. ExxonMobil said it was working with its partners and the government to optimise development plans “by improving synergies and exploring opportunities related to the current lower-cost environment”.
Rovuma LNG is expected to involve two trains, with capacity of 7.6 million tonnes per year. First LNG is expected to come in 2025 – or at least it had been before the FID was pushed back. Gas for the project will come from Area 4’s Mamba field, offshore northern Mozambique.
While Rovuma LNG has been delayed, the Coral floating LNG (FLNG) project remains on track, ExxonMobil said.
An FID had first been expected on Rovuma LNG in late 2019, with the Mozambique government pushing for a decision that would have coincided with its presidential election.
This did not occur with some reports suggesting ExxonMobil and partners were seeking lower costs. Given the industry’s new outlook, enthusiasm for new project approvals has diminished.
In October 2019, a consortium involving JGC Corp., TechnipFMC and Fluor was announced to have won the construction contract, worth a reported $9.2 billion.
Rystad Energy’s senior analyst Aditya Saraswat said the coronavirus and oil price crash had “spurred a global economic slowdown that is putting field development sanctioning under duress. Amid the slowdown, the upstream operators are reducing the activities and revising down the spending guidance for 2020. This has delayed majority of the final investment decisions on the projects including the latest Rovuma LNG in Mozambique.”
The project requires around $20bn in greenfield investments, Saraswat said, “with a landed breakeven price of $7.1 per 1,000 cubic feet”.
Adding pressure to plans in northern Mozambique has been an increase in Islamist violence. The town of Mocimboa da Praia was briefly seized by the suspected Ahlu Sunna Wal Jamaa (ASWJ) group.
Total is also working on the construction of an LNG plant in the area, Mozambique LNG, which reached FID in mid-2019. The French company is reported to have asked for additional protection from the government, over concerns linked to ASWJ.
ExxonMobil set out plans to reduce capex spending by 30%, to around $23 billion, and also reduce operating expenses by 15%. This move came in response to low commodity prices. The largest spending reduction will come in the Permian Basin.
Update 15:54 with comment from Rystad’s Aditya Saraswat.