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Monday, June 27, 2022

Mozambique LNG to Steal NLNG Market as Japan Invests $14bn

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The Japanese government and business sector will join hands on a joint financing deal totaling 1.5 trillion yen ($14.4 billion) for the development of liquefied natural gas in the African country of Mozambique, the Nikkei Asian review reported, a situation which could help steal market share from the NLNG.

Under the deal, a syndicate of lenders including the Japan Bank for International Cooperation and the nation’s top-three private sector banks will provide the loans, while Nippon Export and Investment Insurance will handle default risk.

The consortium believes that the deal presents an opportunity to secure stable production of LNG over the long term and diversify sources for Japan’s LNG supply.

The arrangement calls for JBIC to lend $3 billion, while the remaining amount will be shared among the African Development Bank and Japanese private-sector banks, including MUFG Bank, Mizuho Bank, Sumitomo Mitsui Banking and Sumitomo Mitsui Trust Bank.

Loans provided by the private banks will be insured by NEXI, a Japanese government-affiliated insurer.

The deal will be closely watched by the Nigerian Liquified Natural Gas or NLNG, which exports some 40 percent of its cargo to Asia and of which Japan is a major customer.

NLNG Train-7 project, part of its expansion at the Bonny LNG plant, has received a full investment decision.

The project, expected to start up in 2024, will increase Nigeria’s LNG output capacity by 35 percent from current levels of 22.5 million mt per year to over 30 million mt per year.

NLNG is a joint venture owned by four shareholders; Nigerian National Petroleum Corporation (49%), Shell (25.6%), Total (15%), and Eni (10.4%).

Nigeria has been seeking to expand export markets for its more than 200 Tcf of proven gas reserves in a bid to cut reliance on oil revenue already hit by a drop in global prices.

The expansion will help Nigeria become one of the world’s most important LNG gas hubs and help it leverage its abundant associated gas resources.

“Train 7 is the crux of a growth agenda which will ensure the company’s position as the fifth major supplier of global LNG is maintained, increasing value to its Shareholders and other stakeholders, as well as further reducing the gas that would otherwise have been flared…,” NLNG managing director Tony Attah said.

The Japan deal however may rain on the parade of NLNG.

It is expected to be one of the largest ever overseas investments in Africa.

Japanese general trader Mitsui & Co. and Japan Oil, Gas and Metals National Corp., or Jogmec, will invest a 20% share in the gas field to be developed in Mozambique.

Plans are for the gas field to start producing 12 million tons of LNG in 2024, of which about 30 percent will be supplied to Jera, a joint venture equally owned by Tokyo Electric Power Co. Holdings and Chubu Electric Power, as well as to Tokyo Gas and Tohoku Electric Power.

As deposits in the field are estimated to total over 10 times Japan’s annual LNG imports, the companies expect it to produce a stable supply of the resource over many years.

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