US-based Anadarko Petroleum may seek to speed development of the first two trains of its Mozambique LNG project by sourcing feedstock from its offshore Golfinho and Atum finds.

US-based Anadarko Petroleum may seek to speed development of the first two trains of its Mozambique LNG project by sourcing feedstock from its offshore Golfinho and Atum finds.

“We and Eni are talking about unitisation,” said Anadarko Chief Executive Al Walker at the Barclays Capital CEO Energy and Power conference on 5 September. “I suspect that will go on right up through final investment decision, which will happen sometime in 2013.”

Anadarko and Italy’s Eni have made gas discoveries straddling adjacent blocks offshore Mozambique (see Many hurdles yet for East African gas – Wood Mackenzie, 23 August 2012). Mozambican law requires the companies to unitise the two discoveries, Walker said. Unitisation means that licence holders of gas reserves pool their individual assets in return for an interest in the overall unit.

However, Anadarko has made additional discoveries north of the Prosperidade reservoir that may not be subject to the same unitisation obligations (see Mozambique could ‘drown in gas’, warns energy minister, 27 June 2012). “We also have recently had these big discoveries in Golfinho and Atum, which we believe by year-end will likely cause us to have a separate field from Prosperidade, which is the field that will be unitised at some point with Eni,” said Walker.

“Depending upon how long the discussions and negotiations take with Eni and the government around the unitisation, we may in fact have the ability to take Golfinho and Atum, and whatever that field is called in the future, and feed the first two trains with it,” Walker said.

Anadarko announced the Golfinho discovery in May and Atum in June, both of which lie in Offshore Area 1, where the company is the operator with a 36.5% stake. Estimates suggest the block’s additional recoverable gas resources may exceed 849.50 billion cubic metres.

“These wells, we believe, based upon drill stem tests and the analysis that we’ve done to date, can probably produce over 200 million cubic feet [5.66 million cubic metres: MMcm] of gas per day each,” Walker said. “You’ve got a 750 million cubic feet per day [21.24 MMcm/d] train, you’ve generally got four wells that are going to feed one train, so the costs here have come down substantially because we don’t have to drill as many wells as we once thought.”

“Our ability to use Golfinho and Atum in lieu of Prosperidade will give us a lot of potential leverage in negotiations, as well as being able to economically demonstrate, in a plan of development, that we’ve got the same certified reserves there that we have at the other field, and leave it to the government to decide with us which field will start to feed the first two trains,” said Walker.

Ten or more trains

Walker suggested that the gas offshore Mozambique may be sufficient to supply as many as eight additional LNG trains. “Longer term, we’ve got a lot more than two trains here,”

he said. “I’ve seen analysts talk about 10 or more, and that’s probably realistic in most people’s minds.”

Both Anadarko and Eni are scouting locations for an export plant that could accommodate significant expansion. “Along with our partners and early discussions with Eni, we are trying to firm up a place where we want to build the liquefaction plant, but it has a big enough footprint to be expandable,” Walker said. “You benefit by using the fixed cost associated with a lot of this infrastructure for the first train or two, which then becomes very leverageable, and the marginal cost for each additional train is a small fraction of what the first two were.”

Anadarko plans to begin negotiating sales and purchase agreements with potential buyers within the next year. “This will go into the market around the 2018 timeframe, and we know over the next year or so we’re going to be entering into marketing contracts with the counterparties that will regas it,” Walker said. “We have a pretty good idea of what those are going to look like based on current negotiations,” and “we believe the contract, when we finalise it, the commercial terms will allow the gas to be indexed to oil”.

However, the number of additional trains after the first two will depend on the commercial terms that Anadarko agrees with offtakers. “What I can’t tell you is what the ‘x’ number of trains after that are going to look like and how economic they are,” Walker said.