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Mozambique Upstream Oil & Gas Exploration Forecast
- 18 Jul 2022
- Oil & Gas
Key View: Higher oil and gas prices, and a reorientation of European oil and gas supply away from Russia is likely to bolster oil and gas exploration in Mozambique in coming years, particularly given the fact the government has made progress against insurgents in Cabo Delgado, possibly leading to the end of force majeure at TotalEnergies LNG development later in the year. 16 blocks are on offer as part of the country’s sixth licensing round which will further boost exploration activity, with results expected in November 2022.
- Mozambique launched its sixth licensing round in November 2021, in June 2022, pre-qualifying 12 out of 13 companies in April. These included CNOOC, Sinopec International Energy Investment, Eni Mozambico, ExxonMobil, Petro China International Iraq, TotalEnergies, Discover Exploration, Novatek, ONGC Videsh, Qatar Petroleum Mozambique, RN Angoche and Sasol Africa. Only Aiteo, a Nigerian company, did not pre-qualify. Pre-qualified companies will need to submit proposals, having licensed geoscience data to evaluate areas of interest, by 30 August 2022, with results published on 30 November 2022. The bid round is being managed by Mozambican regulator, Instituto Nacional de Petroleo (INP). 16 blocks are on offer: five in the Rovuma Basin, seven in the Angoche Basin, two in the Zambezi Delta and two in the Save area. 2D and 3D geoscience data is provided by INP alongside GeoPartners covering both onshore and offshore areas in the Rovuma, Angoche and Zambezi basins.
- We forecast a slight uptick in exploration activity in Mozambique over 2022 supported by stronger oil prices and growing interest in non-Russian gas, though investors will remain cautious of the more uncertain price environment, with many 'non-essential' or high risk/high cost projects at risk of delays or cancellations.
- In September 2021, it was reported that Empresa Nacional de Hidrocarbonetos (ENH) and Mozgas UK were partnering on exploration and research activities in the Mazenga block, in Inhambane province. Mozgas UK holds 80% interest in the block, while ENH holds the remaining 20%.
- In August 2021, ENH and Buzi Hydrocarbons's two well drilling campaign in the onshore Buzi block was announced complete, having been suspended in H120. According to an update in December 2021, indications of natural gas were found in the Upper and Lower Grudja geological formations, though studies remain ongoing to determine the amount of gas available.
- In July 2020, Sasol announced it will relinquish its offshore exploration licenses in Blocks 16 and 19, following an evaluation of the exploration potential of the blocks. Sasol had been awarded the blocks in 2005.
- In February 2020, CGG announced the final 3D PSDM seismic dataset from its recent 15,400sq km multi-client survey of the outer Zambezi Delta in the Mozambique Basin is now available for licence. The data was acquired on blocks Z5-C and Z5-D (these blocks are operated by ExxonMobil), in addition to surrounding open acreage as part of a multi-client program agreed between CGG and Mozambique’s INP.
- In August 2019 Rosneft signed a Cooperation Agreement with the INP. The company also signed a Memorandum on Expansion of Cooperation in Mozambique with the state-owned ENH. Rosneft is granted the rights to study available geological data on a number of onshore and offshore blocks in order to examine their potential, and the opportunity to enter projects on those blocks in the future.
- In June 2019, Eni acquired a 10% stake in three exploration blocks (A5-B, Z5-C and Z5-D) located in the deep waters of the Angoche and Zambezi basins offshore Mozambique. The three blocks, allocated during the country’s Fifth Licensing Round, are operated by US major ExxonMobil (40% interest), in partnership with state-owned ENH (20%), Russia’s Rosneft (20%) and QatarEnergy (QE, 10%).
- In March 2019, QatarEnergy (formerly QatarPetroleum) signed an agreement with Italian major Eni to acquire a 25.5% stake in offshore Block A5-A, located in the Angoche Basin. The partners holding interest in the block are Eni (34%, operator), ENH, South Africa's Sasol (25.5%) and QE (25.5%).
- QE announced in early December 2018 that it would acquire a 10% stake in three deep offshore exploration blocks in the Zambezi Basin (A5-B, Z5-C and Z5-D) from ExxonMobil. The A5-B block covers about 6,450sq km and the Z5-C and Z5-D blocks have a total area of about 10,200sq km. The new distribution of partners following the transaction is ExxonMobil (50%, operator), ENH (20%), Rosneft (20%) and QE (10%).
Mozambique has few proven oil reserves. There is, however, upside to liquids as both offshore and (potentially) onshore exploration targets oil, with the small southern onshore Inhassoro oil field, located within the Inhambane concession, proving the oil potential of the area. With Mozambique being the terminus of the prolific East African Rift, which is the source of oil plays in Uganda, Kenya and Somalia, we believe increased onshore exploration targeting liquids could well see sizeable reserves proved up over the coming years.
In addition, while present indications are that gas discoveries are largely dry, there is some upside from the prospect that future offshore gas discoveries could contain condensates or natural gas liquids alongside gas. The more southerly exploration blocks show a higher potential for oil, supported by wet gas discoveries by Eni in the southern part of Area 4.
Previous to the booking of the large offshore reserves, Mozambique's proven gas reserves came from three onshore gas fields in the Mozambique basin: Pande, Buzi and Temane. However, with the discovery of large offshore gas fields, Mozambique's official proven gas reserves have jumped from a mere 130bcm in 2013 to an estimated 2.83tcm in 2021.
Mozambique's deepwater Rovuma Basin has continued to deliver prolific exploration success for operators offshore. ENH estimates that natural gas reserves there could be in the range of 7tcm. Given the size and scale of discoveries to date and with the region remaining relatively underexplored, it is not impossible to consider reserves reaching these levels over the long term following new exploration campaigns.
Offshore Gas Reserves Getting Booked
Mozambique - Oil & Gas Reserves (2020-2031)
e/f = Fitch Solutions estimate/forecast. Source: EIA, Fitch Solutions
Now operated by TotalEnergies, until August 2019 the Area 1 block was operated by US-based Anadarko. In 2019, Anadarko estimated that offshore Area 1 contains recoverable resources of approximately 75tcf (over 2.1tcm) of natural gas. In 2015, Anadarko confirmed that the offshore exploration phase had come to a close and these reserve estimate numbers seem to remain in place to date. The main gas fields located within the license are Prosperidade, Golfinho/Atum, Orca and Tubarao and Tubarao-Tigre.
- The Prosperidade complex is estimated to contain 476-840bcm worth of recoverable resources.
- Exploration over 2012 opened up a new play with the discovery of the Golfinho/Atum complex. Drilling success continued in 2013.
- The Orca discovery in April 2013, to the south of the Golfinho/Atum Complex and east of the Prosperidade field, opened up a new play. Drilling success continued further, with the Orca-2, Orca-3 and Orca-4 wells hitting significant gas plays. Anadarko estimated that the Orca field has a potential size of 168-308bcm of recoverable natural gas.
In June 2019, Anadarko announced an FID on its Area 1 Mozambique LNG onshore export terminal project. It will be the country’s first onshore LNG development, consisting of two LNG trains with total nameplate capacity of 13.1mtpa. It will exploit the huge gas resources of the Golfinho/Atum fields discovered within offshore Area 1. The project is estimated to cost in the range of USD20bn.
In September 2019, TotalEnergies announced the closing of the acquisition of Anadarko's 26.5% operated interest in the Mozambique LNG project for a purchase price of USD3.9bn. This closing comes after TotalEnergies reached a binding agreement with Occidental in May 2019, to acquire Anadarko’s assets in Africa (Mozambique, Algeria, Ghana and South Africa) and signed the subsequent Purchase and Sale Agreement in August 2019. The Mozambique LNG project ownership is now operated by TotalEnergies (26.5% participating interest), alongside ENH Rovuma Area Um (15%), Mitsui E&P Mozambique Area1 (20%), ONGC Videsh (10%), Beas Rovuma Energy Mozambique (10%), BPRL Ventures Mozambique (10%), and PTTEP Mozambique Area 1 (8.5%).
The Area 4 block is currently being developed by Eni (operator, 25%), in partnership with ExxonMobil (25%), China National Petroleum Corporation (20%), ENH (10%), Kogas (10%) and Galp (10%). As of early 2022, the company's website indicates that its resource base in Mozambique totals approximately 85tcf (2.4tcm). The main gas fields located within the license are Mamba, Coral and Agulha.
- Eni encountered a number of high-impact discoveries in the Mamba and Coral complexes located along the border between Area 1 and Area 4. In April 2014, Eni revealed that it had successfully completed its current appraisal campaign for Area 4 with the Mamba South 3 well, the 10th to be spud on the block.
- In September 2013, Eni made a wet gas discovery at its Agulha well in the southern part of Area 4, unlocking a new exploration play. The geological sequence targeted at Agulha is more mature than the dry gas discoveries in the nearby Oligocene/Eocene-age Mamba complex, with the Agulha well encountering 160m of wet gas play in deeper Paleocene and Cretaceous layers. In addition to opening up a new exploration play, the liquids shown from the well created upside potential for liquids discoveries in future exploration.
Area 2 And Area 5
Africa-focused independent Tullow Oil partnering with Norway-based Statoil (now Equinor) was targeting offshore oil rather than gas. The pair was targeting an estimated 200mn bbl of oil at the Cachalote prospect. However, the well was plugged and abandoned as non-commercial after encountering 38m of gas-bearing sandstone. While there were indications of wet gas, a second attempt at the Buzio-1 well also turned up dry. Following these negative results, the members of the consortium decided to abandon the two licenses in 2014.
Areas 3 And Area 6
Petronas' initial drilling was a disappointment, with two exploration wells turning out to be dry, raising questions as to how far south the plays actually extend. In 2012, TotalEnergies farmed into the two blocks and wanted to begin exploration drilling at the end of 2017 but failed to bring in a partner to help drill the first exploration well. As a result, TotalEnergies later gave up its operatorship of the two blocks.
Oil & Gas Concessions
Mozambique - Oil & Gas Concessions