The Rovuma Area 1 gas project in Mozambique is currently facing lack of investment as the commencement of production is now uncertain.

With no binding agreement from possible Liquefied Natural Gas (LNG) buyers, it is still not sure when operations will begin on the field as few buyers were willing to sign long-term contracts in this declining oil and gas pricing environment.Two government officials from India have said that approximately $6 billion has been invested in the Rovuma Area 1 gas assets before now and another $25-billion would be needed to bring the field on stream.Since gas purchase agreements have not been signed, stakeholders were reluctant to make a final investment decision as the project’s estimated cash flow could not be figured out.

When the Indian oil and gas companies initially began to invest in Rovuma, they had predicted that production would commence in 2018, but no official are now willing to predict when commercial production from Rovuma will begin. Both officials have decided that it will not be before 2021 or 2022, as that too is subject to the recovery of oil and gas prices as well as the search for buyers for LNG from the project.

This late development at Rovuma is bad for the bilateral relations between Mozambique and India. As a matter of fact, it is also a disadvantage for India’s effort to gain a bigger footprint in the African hydrocarbon sector.

ONGC Videsh, Oil India Limited and Bharat Petroleum Corporation Limited jointly holds a 30% stake in Rovuma Area 1. Anadarko is still the lead operator of the block, which is believed to have reserves between 35 and 65 Tcf of gas, Engineering news reports.

Anita Fatunji