Jos Evens, Country Manager for ExxonMobil Mozambique, talks about the company’s landmark projects in the country, the importance of a timely FID and how ExxonMobil’s LNG expertise is poised to overcome challenges associated with Rovuma LNG. ExxonMobil Mozambique is active in three offshore blocks as well as the Area 4 projects.
TOGY: What
have been the key milestones of ExxonMobil in the country?
Jos Evens: ExxonMobil
always recognised the value of Mozambique. We were here in the 1980s exploring
for oil and gas. We were always keen on getting involved in Mozambique.
Therefore, we entered the 2014 fifth licensing round, in which we won three
blocks.
In December 2017, we acquired 35.7% of the shares of Eni East Africa, which is
now the Mozambique Rovuma Venture. As a result we secured a 25% indirect share
in Area 4.
In July 2018, ExxonMobil submitted the plan of development (PoD) for the
optimised production, liquefaction and marketing of natural gas for the first
phase of the Rovuma LNG project in Area 4. We continue to work with government
authorities to ensure that the PoD meets the expectations of all interested
parties.
It’s important to continue to build on this momentum, as we look to reach the
final investment decision in 2019. 2018 was a remarkable year because starting
from a zero footprint, we have grown this organisation hugely to support our
participation in Area 4.
In addition to the Area 4 project development activity, in October 2018,
ExxonMobil as operator and Rosneft and ENH as partners signed contracts for
three offshore exploration blocks with the government of Mozambique. These
concessions are A5-B in the Angoche Basin and Z5-C and Z5-D in the Zambezi
Delta.
TOGY: What is the significance of the stake in Area
4 for ExxonMobil? What opportunities does the block offer to develop
Mozambique’s oil and gas industry?
Jos Evens: The
deepwater Area 4 block contains more than 85 tcf [2.41 tcm] of natural gas, which
will provide resources for a world-class LNG project. This means that the
Rovuma LNG development has the potential to be a transformative project for
Mozambique, one that will help deliver reliable, affordable energy to customers
globally, and create long-term economic value for project partners and the
people of Mozambique.
We fully appreciate and support the government’s strategic objective of using
the gas projects as a catalyst for the socioeconomic development of Mozambique.
The Rovuma LNG project is playing a significant role in Mozambique’s
industrialisation and we are committed to supporting efforts in this regard.
The development of the country’s natural gas resources will have a multiplier
effect in that it will support economic growth on various fronts. Ultimately,
beyond the expected revenue that the project will generate for the respective
stakeholders, the Rovuma LNG project will promote employment, improve
infrastructure and develop associated industries that will assist in the
socioeconomic development of Mozambique.
TOGY: What are the intrinsic challenges associated with developing this greenfield project?
Jos Evens: The intrinsic challenges apply to the Rovuma
LNG phase 1 project. Mozambique does not have much experience in the oil and
gas industry. We have to take into account that we need to find the necessary
capacity in order not to cause a delay in the activities.
As an example, in building LNG trains, at the peak of construction about 20,000
people are involved. Some of the employees are local, but there are a lot of
foreign skills needed, just because the capacity is not here yet.
ExxonMobil will apply its global LNG expertise and proven project management
experience to ensure that we meet our project execution commitments. This will
allow us to start gas production by 2024, thereby taking advantage of the
window of opportunity created by anticipated growth in global gas demand.
As well, the security situation in the north that started in October 2017 has
worsened. We are greatly saddened by these events and send our heartfelt
sympathy to the victims of the recent attacks, their families and all of those
who have been affected by this incident. ExxonMobil will continue to work with
local authorities and industry to assess the situation, and ensure measures are
in place to protect our workforce. Safety is a core value at all of our
operations and facilities around the world.
TOGY: How has the Rovuma LNG project been
progressing?
Jos Evens: The Rovuma LNG project has both a midstream
component, led by ExxonMobil Mozambique, and an upstream subsurface component
that will be led by Eni. We submitted a PoD in July 2018, and we did so early
because we want to make sure we have enough co-operation from the ministries.
Now we are waiting for the government to approve the PoD.
We continue to work with INP and the Ministry of Mineral Resources and Energy
to support their efforts in the approval process. Ultimately, we share a firm
goal of a final investment decision in 2019 with construction beginning in late
2019 and LNG production expected in 2024.
TOGY: What is the relevance of securing the FID approval in 2019?
Jos Evens: We submitted the PoD with
the expectation of taking the FID in 2019, and we are still working on that
plan. It is important to achieve this speed because the LNG market is a very
competitive one.
All forecasts for 2024 say that the market will open up, and the demand will
stay strong. LNG will have the strongest quote. Also, many of the suppliers
will enter a depletion mode. Existing contracts will be expiring. This means
that the gap and opportunity for new projects starts in 2024.
If you calculate five years as typical time for the development of a new plant,
that’s the reason we realised that it was necessary to approve the FID in 2019
to position Mozambique in the front of the line. Competition is fierce, with
many new projects, as well as expansion projects. The timing is essential.
TOGY: In October 2018, ExxonMobil and partner Rosneft signed contracts for exploration blocks A5-B in the Angoche Basin and Z5-C and Z5-D in the offshore Zambezi Delta. What is the potential of these blocks, and how do you expect to develop them?
Jos Evens: We have always recognised
the strategic importance of Mozambique, and were keen on getting involved. That
is why in 2014 we entered Mozambique’s fifth bidding round.
By the end of 2018, we had acquired all the seismic data. We have made an exploration
plan. The expectations are that in the early 2020s we can start the first
exploration and drilling in these three blocks.
These blocks are significant for ExxonMobil as they mean we have the country
covered from north to south. There is Area 4 in the north, then exploration in
the Zambezi Delta and Angoche areas, and then our head office activity in the
south.
We believe that our expertise in conducting successful deepwater exploration
projects positions us as a reliable partner for the government of Mozambique
and we look forward to exploring the resource potential of these three
high-quality blocks. The addition of these blocks reaffirms ExxonMobil’s
commitment to the government of Mozambique to explore and develop the country’s
hydrocarbons resources.
TOGY: How do you compare Mozambique with the major LNG producers?
Jos Evens: One of the advantages for ExxonMobil is that
we have experience in similar developments such as Qatar, Papua New Guinea and
Australia, and this experience will benefit us in Mozambique.
From the perspective of the size of the resources, these developments are
different, but the potential of Area 4, combined with Area 1 and Coral is high,
totalling more than 30 million tpy. Qatar at the moment has 77 million tpy of
existing capacity, so in a short time Mozambique will reach almost half of
Qatar’s production. But there is also a potential for a phase 2 and a phase 3.
So, in the long term, Area 4 might reach 50 million tpy.
Qatar has more gas and they are very cost effective; that is why is it is so
crucial that the cost competitiveness of Mozambique is there. These projects
are long-term projects, lasting 25-30 years, and to protect yourself against
the cycles, you need to be at the lowest end of the cost.
Most of the big companies are positive about Mozambique.
TOGY: What are ExxonMobil’s initiatives to ensure knowledge transfer to the local workforce and the development of local content?
Jos Evens: We aim to work with the government,
communities and local companies to meet and hopefully exceed legal obligations
on national content. If you want to be cost efficient, you have to be reliant
on the local capacities.
We believe in the importance of using local suppliers and hiring local workers
where possible in order to maximise the economic benefits this project can
bring to the country. We will make every effort to actively build the local
workforce and suppliers, transfer technical experience and encourage
entrepreneurialism and participation by Mozambican stakeholders. Through our
enterprise development centre, we will work with Mozambican businesses to
ensure they are able to attain the prerequisites for certification.
The Rovuma LNG project has a significant local content strategy that envisions
a predominantly Mozambican workforce once in operation, a robust community
investment strategy that is sustainable and aligned with priority needs of our
host communities and active engagement of local suppliers in support of the
goods and services that we can procure locally.
The operations readiness team is already working to hire and
train Mozambicans for the operation phase, where we expect to reach an 85%
national workforce, as is the case in all other countries ExxonMobil works in.
To accomplish this shared objective, we are targeting the FID in 2019. To this
end we are also working collaboratively with government institutions on matters
related to visas and immigration, Customs and security.
TOGY: What are ExxonMobil’s objectives for 2019 and medium and its long-term vision for the country and the region?
Jos Evens: We are working actively with the government of
Mozambique to secure approval for the Rovuma LNG PoD. This is a critical first
step to ensure that we are able to work with the financial community to ensure
a final investment decision in 2019. Achieving these milestones will ensure
that we are in a position to start producing gas by 2024.
Not only will this start generating revenues for all stakeholders, but the
associated industries and economic activity between the FID and the start of
production will be a tremendous boost for Mozambique’s economy on various
fronts.
In addition, we are confident in the potential of our exploration programme as
the base for future growth of our business in Mozambique.
The organisation after the FID will grow quickly. We are committed to our
long-term business strategy in Mozambique. We recently acquired a plot of land
in Maputo that will go towards our future installations.
Mozambique holds a prominent position in ExxonMobil’s global upstream
portfolio. We look forward to a long relationship of co-operation and
partnership, as we deliver on our promise to the government and communities
across Mozambique.
This interview was conducted by TOGY.