London, UK | – Italian multinational energy company Eni signed an $8-billion deal on Thursday to develop a gasfield off the coast of Mozambique, the first of a series of projects that could transform the poor African nation into a major energy supplier to Asia.
Developing the Coral South field, discovered in May 2012 and operated by Eni, requires building six subsea wells connected to a floating facility capable of producing about 3.4-million tonnes of liquefied natural gas (LNG) per year, Eni said.
The project would cost $8-billion and LNG exports were expected to start in 2022, Eni said.
“The Coral South Project will deliver a reliable source of energy while contributing to Mozambique’s economic development,” Eni chief executive Claudio Descalzi said in a statement.
The Coral South field contains about 450-billion cubic metres, or 16-trillion cubic feet (tcf) of gas. The field lies in the Rovuma Basin, with estimated reserves of about 85 tcf, enough to supply Germany, Britain, France and Italy for nearly two decades.
Mozambican authorities approved the project’s development plan in February 2016 and in October Eni signed a 20-year deal to supply BP with LNG from the project.
Mozambique, which lies on Africa’s eastern seaboard, is well placed to supply growing Asian economies with gas, analysts say.
The floating LNG platform will be built in South Korea by a consortium led by Samsung Heavy. The group includes France’s Technip and Japan’s JGC.
Partners in the field development include China National Petroleum Comapny (CNPC), Korea Gas Corporation (Kogas) and Mozambique’s state-run Empresa Nacional de Hidrocarbonetos (ENH).
US multinational energy supermajor Exxon Mobil Corporation agreed this year to pay Eni $2.8-billion for a 25% stake in its huge Area 4 concession off the coast of Mozambique, which includes the Coral South field.
US independent explorer Anadarko is planning a separate onshore LNG project in northern Mozambique.
Eni said project finance would fund 60% of the cost of building the floating LNG facility, while the financing agreement has been subscribed by 15 major international banks and guaranteed by five export credit agencies.
Eni’s long-delayed final investment decision will be a relief for the Mozambican government following a high-profile debt scandal that emerged last year.
The International Monetary Fund and Western donors cut budget support when $2-billion in hidden loans were exposed, plunging the country into economic crisis.
LNG exports are seen as the only likely long-term solution to the country’s deep financial problems.
“This is really good news for the government of Mozambique,” said Alasdair Reid, Africa expert at energy consultancy Wood Mackenzie. “It demonstrates that, despite ongoing credit issues, there is still enough belief in the investment climate for partners to raise finance and move projects forward.”