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Mozambique consults Shell on natural gas

10th May 2012

East-African country seeks advice from oil giant over vast natural gas reserves and export potential

An island off Mozambique. The area is rich in natural gas.

Mozambique is in talks with Shell about developing its natural-gas resources, including a possible liquefied-natural-gas project, President Emilio Guebuza said Wednesday.

Shell, which last month had a USD 1.8 billion bid for Mozambique-focused gas producer Cove Energy recommended by the firm's board, may choose to use the access to one of East Africa's most promising natural-gas provinces to develop giant export facilities, Dow Jones reported.

'We are working with Shell,' said President Guebuza.'It's true. We believe what they are saying.'

President Guebuza said his country would seek to 'negotiate a participation in mega-projects' like an LNG plant, but he stressed that this was in the interest of developing local skills and initiative and using any revenues to progress the country's social agenda.

'We want them [companies investing in the country's resources] to develop profits for shareholders. But above all, we want to ensure these benefits help all the people of Mozambique,' said President Guebuza.

Shell upped its bid for Cove, a junior partner in the potentially huge Rovuma gas field, on 24 April. Although Shell's 220 pence a share bid only matched an earlier offer by Thai-stated owned PTT Exploration & Production (PTTEP), Cove's board recommended Shell's offer to its shareholders, arguing that the Anglo-Dutch major's expertise in gas exploration, production and most critically, exports, set it apart from its rival suitors.

Interest in Cove, a modestly-sized exploration company listed on London's junior exchange, has been fueled by its 8.5 per cent stake in Rovuma, owned and operated by Anadarko Petroleum. Shell's offer has been hailed by analysts as a logical step for the world's biggest shipper of liquefied natural gas. With an estimated 30 trillion cubic feet contained in the Rovuma field, and nearby finds by Italy's Eni potentially holding twice that amount, there could be enough gas to justify the construction of an LNG facility to supply high-demand Asian markets. Shell announced later Wednesday that it has received the consent of Mozambique's Minister of Natural Resources for the acquisition.

Speaking at an event at British think-tank Chatam House, Guebuza said his government aimed to harness the proceeds of Mozambique's hydrocarbon and mineral resources. The country has only recently started to emerge from the shadow of a devastating civil war that ended in 1992. Although growth averaged 7.2 per cent last year, more than half the population still lives in poverty, according to the CIA Factbook.

'International partners are welcome to join us in this journey so we can one day celebrate the end of poverty,' he said. 'Our vision is to turn our mineral resources into a driving force for social transformation.'

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