You are here

East Africa to become major LNG exporter

17th May 2012

Italian and UK companies announce major gas discoveries offshore Mozambique and Tanzania

East Africa - the new frontier for oil and gas exploration?

East Africa’s future as a major liquefied natural gas (LNG) exporter to Asia was cemented this week after fresh discoveries were announced by Italian oil group Eni and UK companies BG Group explorer Ophir Energy.

ENI announced on Wednesday it had discovered a vast new field at its exploration block in Mozambique while UK  while Britain's BG Group and said they made a big find at their Mzia well in Tanzanian waters.

The size of these discoveries, coming on top of earlier finds, will more than justify the billions of dollars it will cost to build at least two LNG projects to cool the gas into liquid form for shipment on tankers, Reuters reported.

Calling its gas find "important", Eni said it estimated that, with the latest discovery made in Mozambique, its block could potentially hold up to 52 trillion cubic feet (tcf) of gas.

Around 10 trillion cubic feet would be enough to meet an entire year's gas consumption by France, Germany, Britain and Italy.

"The success at Mzia-1 is a major step towards a Tanzanian LNG hub development in Block 1," said Chief Executive Nick Cooper of Ophir Energy, whose shares jumped 12 percent.

Oil and gas companies have flocked to East Africa in recent years, spurred by advances in deep-water drilling and problems in securing access to reserves in areas historically seen as more promising, such as the Middle East.

The resources discoveries have boosted prospects for the region's development, paving the way for energy-intensive industries to emerge there if some of the gas is made available for domestic use.

Analysts said oil majors without a presence in the region would rush to gain exposure to such huge new reserves, meaning more merger and acquisition activity could be possible after Royal Dutch Shell's move to try to buy British explorer Cove Energy.

"We believe that it can only be a matter of time before Ophir Energy comes to the attention of the oil majors in the same way that Cove Energy did with Shell," Westhouse Securities analysts said.

Cove is partnered with US explorer Anadarko Petroleum Corp in Mozambique, and the two said on Tuesday they also discovered a major new gas field off the country's coast, in an area neighbouring ENI's block.

Eni, which has Portugal's Galp Energia as its partner in Mozambique, has said that it will consider selling a stake in its Mozambican block but does not expect to make a decision on any deal before the end of the year.

Shares in Eni traded up 0.1 percent while BG's shares added 0.2 per cent, broadly in line with the European oil and gas index .SXEP which was 0.2 per cent higher.