A consortium including JGC has reached a 700 billion yen ($6.33 billion) deal to build a floating liquified natural gas platform, off the coast of Mozambique, as expected demand from emerging economies rekindles interest in LNG plants despite the fuel’s languishing prices. Developers on the project include the state-backed Italian oil and gas multinational Eni, plus China National Petroleum and Korea Gas. JGC will handle planning, procuring materials for and building the plant, together with French competitor TechnipFMC and South Korea’s Samsung Heavy Industries. JGC will handle a roughly 150 billion yen portion of the contract. The plant is aimed to start operating in the early 2020s.
The floating platform will produce around 3.4 million tons of LNG annually, by tapping gas fields on the sea floor off Mozambique, in East Africa. British oil major BP, will buy the entirety of the gas produced over 20 years, then sell it in regions such as Asia and Europe. The Mozambique platform is JGC’s first new LNG plant construction order since winning a project in Yamal, northern Russia, in 2013. Long-term LNG contract prices are often linked to the price of crude oil, and have been on a downward trend as crude prices have fallen. Resource development companies’ purse strings have also tightened, and in the fiscal years 2015 and 2016, they tended to shy away from LNG plants, for which investments can reach billions of dollars.
Chiyoda Corp., a Japanese rival to JGC, likewise took no new LNG plant orders in fiscal yearsl 2015 or 2016. International competitors such as TechnipFMC and U.S. engineering firm, Bechtel struggled to make deals as well.
Natural gas reserves have also been confirmed in Tanzania, which borders Mozambique to the north. These East African deposits have garnered attention in the resources industry because they also have a geographical advantage;to get there,without LNG tankers needing to pass through the Straits of Hormuz, a choke point in the Persian Gulf prone to geopolitical risk.
Mitsui & Co. and the U.S.’s Anadarko are also planning an onshore LNG plant in a nearby Mozambique mining area, but no final investment decision has yet been reached. If gas development in East Africa continues rising, it could become an LNG-exporting region to follow the likes of Qatar and Australia. JGC’s Mozambique floating LNG platform will be its first in Africa. The plant faces fewer barriers to construction than an onshore plant, which in infrastructure-poor East Africa would require buying land and building roads and other facilities.