India's $20 Billion LNG Project in Mozambique: A Path to Energy-Sufficiency and Global Impact

In the heart of New Delhi, a group of #Indian officials gathered on a warm Sunday morning to listen to Hardeep Singh Puri, the Union Minister for Petroleum and Natural Gas. He stood at the front of the room, the anticipation in the air palpable. The reason for this gathering was monumental - the unveiling of the much-awaited $20 billion LNG project in Mozambique.

?This project, located in #Mozambique's northern Cabo Delgado province, held more than just economic promise; it held the key to India's journey towards energy-sufficiency. It was a project of strategic importance, and the Indian government was deeply invested in its success. Three Indian Public Sector Undertakings (PSUs) collectively held a 30 percent stake in this venture.

?The visit by Hardeep Singh Puri wasn't just a routine inspection; it was the second significant diplomatic move following a crucial meeting in May 2023 between Oil Secretary Pankaj Jain and Patrick Pouyanne, the CEO of TotalEnergies. The meeting had discussed the possibility of resuming operations at the project, signaling a potential turning point.

?TotalEnergies, a global energy giant and the operator of the project, had initially ceased all on-site work in April 2021, citing "force majeure" - a provision allowing parties to halt or terminate a contract due to uncontrollable circumstances. This decision had been made in response to attacks on civilians in the province of Cabo Delgado, carried out by militants with ties to the Islamic State.

?The Mozambique LNG Project had its roots in the discovery of vast natural gas reserves off the coast of northern Mozambique in 2010. To expedite the export of this super-chilled fuel by the end of 2024, the project had witnessed significant investments and a change in ownership.

?In 2019, Texas-based Anadarko Petroleum purchased a 26.5% share in the project from Total E&P Mozambique Area 1 Lda for $3.9 billion. The National Oil Company of Mozambique, Empresa Nacional de Hydrocarbonetos (ENH), held a 15 percent share, with Mitsui of Japan and PTTEP of Thailand as partners, owning 20 percent and 18 percent stakes, respectively.

?Crucially, three Indian PSUs - Oil and Natural Gas Corp Ltd (ONGC) through ONGC Videsh (OVL), Oil India (OIL), and Bharat Petroleum Corporation through its subsidiary Bharat Petro Resources Limited (BPRL) - jointly held a 30 percent stake in the project. With a capacity of 12.88 million tonnes per year, it was one of the largest greenfield LNG plants ever permitted.

?The project's significance extended beyond India's borders. The Area 1 block, located 40 km off the coast of northern Mozambique, was one of the most important gas discoveries in the last 20 years globally. With an estimated 75 trillion cubic feet of recoverable gas, it promised a resource life of about 120 years at an initial production rate of 12.88 million tonnes of LNG annually.

?India's growing emphasis on natural gas in its energy portfolio was driven by the government's efforts to increase gas consumption. With plans to raise natural gas's share in its energy mix from 6% to 15% by 2030, India was actively seeking new LNG sources. Mozambique's strategic location and the absence of Middle East geopolitical challenges made it an attractive source for competitive LNG supply.

?Furthermore, the project held logistical convenience, as Mozambique's proximity to India's west coast, with a high number of LNG terminals, promised swift and efficient transportation.

?However, TotalEnergies hadn't resumed project development since declaring force majeure in April 2021. The situation in Cabo Delgado remained complex, and it was not without challenges. In December 2022, the company had commissioned humanitarian expert Jean-Christophe Rufin to assess the province's humanitarian situation. The May 2023 report highlighted the continued armed conflict but also identified shifting danger zones.

?The report recommended compensating displaced families, constructing new housing, improving fishing access, renegotiating security force relations, and creating a $200 million budgeted foundation for local life improvement. TotalEnergies responded by announcing its commitment to an action plan based on the report's conclusions, taking a significant step toward a project restart.

?Since May 2023, India had been actively engaging with all project stakeholders to revive the halted project. During his visit, Hardeep Puri discussed the project's future with Maxime Rabilloud, the director of TotalEnergies in Mozambique. The Union Minister also toured the expansive 7500-hectare site of the LNG project, accompanied by the Governor of the Province Dr. Valige Tauabo and the heads of three Indian companies involved in the venture.

?As they stood on the precipice of change, their eyes fixed on a brighter, more energy-efficient future, the Indian delegation left Mozambique with a sense of optimism, a belief that with determination and international cooperation, the $20 billion LNG project could become a symbol of progress and resilience in a challenging world.

?The suitability of #LNG imports from #Mozambique, #Qatar, or #Iran for India would depend on various factors, including economic, geopolitical, and strategic considerations. Here are some key points to consider when evaluating these options: Proximity and Transportation Costs:- Qatar is geographically closer to India, which can reduce transportation costs compared to LNG imports from Mozambique or Iran. Mozambique and Iran are farther away, which may result in higher transportation costs, longer shipping times, and potentially higher environmental impact.

?Political and Geopolitical Factors: Geopolitical relationships and diplomatic ties play a significant role in determining the feasibility and reliability of LNG imports from these countries. Qatar has been a historically stable and reliable supplier of LNG. Iran's LNG supply to India may be influenced by international sanctions, geopolitical tensions, and political considerations, which can introduce uncertainties. Mozambique was grappling with a significant conflict in the northern region of Cabo Delgado. A militant group known as Ansar al-Sunna, locally referred to as Al-Shabaab (though it has no clear connection to the Somali group Al-Shabaab), had been conducting a violent insurgency in the region since 2017. This insurgency resulted in significant instability, displacement of civilians, and loss of life. Mozambique has a history of political challenges, including issues related to governance, corruption, and political tensions.

?LNG Infrastructure and Capacity: Qatar has a well-established LNG infrastructure, including liquefaction facilities and a reliable track record of supplying LNG to India. Mozambique is an emerging player in the LNG market with substantial reserves, but it may take time to develop the necessary infrastructure and capacity for consistent exports. Iran has potential LNG resources, but its LNG industry has been constrained by sanctions and underdevelopment.

?Pricing and Contract Terms: The terms of LNG contracts, including pricing, flexibility, and supply guarantees, will affect the financial viability of imports from each country. Qatar has been known for its flexible and competitive pricing and contract terms. Mozambique and Iran would need to offer competitive terms to attract Indian importers.

?Energy Security and Diversification: India may aim to diversify its sources of energy imports to enhance energy security and reduce dependence on any single supplier. Diversifying sources of LNG can mitigate supply risks in case of geopolitical or economic disruptions in one country. India may also consider the environmental impact of LNG imports, including emissions associated with long-distance transportation.

?Ultimately, the choice between Mozambique, Qatar, or Iran for LNG imports will depend on a combination of these factors, as well as the specific energy needs and priorities of India. It may be beneficial for Indian policymakers to conduct a comprehensive evaluation of these factors before making a decision. Additionally, the global energy landscape is dynamic, and circumstances can change over time, affecting the attractiveness of different LNG sources. Having said that this deal is not going to ease India’s trouble before next three years.