(Ecofin Agency) - The commencement of the extraction of liquefied natural gas in Block Area 1 of Rovuma Basin in northern Mozambique, should only occur in 2021, later than initially scheduled according to an industry source.

The source stated that the decline in the prices of oil and natural gas has made companies suspend investment decisions as buyers are not waiting in line to purchase the product.

“It's the classic chicken and egg situation where you can’t sign supply agreement because the final investment decision has not been made because you don’t know exactly who will buy the gas,” the undisclosed source told Macauhub.

The main cause of this problem is the huge fall in the prices of LNG in the last two years after a supply glut that made both sellers and the customers unsafe in the signing of long-term deals.

Mozambique’s case is unexceptional as many other projects are faced with the same fate, but in this case Anadarko which is the operator of Block Area 1 has before now signed some gas supply agreements.

The final investment decision (FID) is expected to be made this year. This may allow production to begin in 2021, three years later than was reported by Oil and Natural Gas Corporation (ONGC) in 2013, when it obtained an interest in the block.

Situated in water depths from 900m to 1,600m, the Rovuma Area 1 is estimated to hold recoverable resources of more than 75 Tcf.

Anadarko operates the block with 26.5% interest alongside ONGC overseas investment arm of ONGC Videsh with 16% interest, Bharat Petroleum with 10%, Oil India with 4%, Mitsui with 20%, ENH with 15% and PTTEP with 8.5% interests.

Anita Fatunji