Significant natural gas discoveries in East Africa could spur increase in merger and acquisition activity over the next year
Mozambique now has the prospect of becoming a global natural gas hub after the discovery of more than 30 trillion cubic feet of gas. With further drilling planned, it's widely thought that ultimate recoverable resources from the offshore Rovuma basin could be even bigger than expected and as much as 100 Tcf.
The discoveries by Italy's Eni and Anadarko of the US will not only lead to large-scale development and economic growth in the country, but will also boost the region's energy supply and attract more exploration.
Eni plans to build its own LNG terminal in Mozambique to handle gas from the discovery while Anadarko also believes that the size of its resource merits the use of at least two 5-million tonne per annum LNG trains.
Deepwater exploration
These discoveries are likely to lure other international oil companies into deepwater exploration, and not just in Mozambique but also in Kenya and Tanzania.
Industry activity in East Africa has already accelerated in recent months. France's Total has stepped up its plans for a development hub in the region, acquiring acreage in Tanzania and Kenya.
Also in Tanzania, Royal Dutch Shell has farmed into Blocks 5 and 6 with Brazil's Petrobras, while Ophir has made an all-share offer valued at $186mn for Dominion Petroleum, which will increase Ophir's portfolio in Tanzania and add acreage in Kenya.
Scale of LNG projects
LNG facilities are among the most expensive energy projects. When gas production and shipping costs are included, the scale of many LNG projects is such that even the biggest companies struggle to undertake them,
Ownership structure is almost certain to change as projects in East Africa move on to the next stage. Smaller companies may find that the pressure of having to fund their share of very significant expenditure will make them vulnerable to takeover or force them to sell their interests.
