Exxon, Total in Talks over Mozambique LNG Deal

JOHANNESBURG/MILAN (Reuters) - ExxonMobil and Total are in negotiations over their massive LNG projects in Mozambique, with each seeking to extract more gas from a shared field that straddles the two developments and cut costs, three sources familiar with the matter told Reuters.

The talks between the energy majors also involve the Mozambican government, according to the sources, as it has to give final approval to any new agreement.

The field that straddles the projects happens to contain gas that is thicker and therefore cheaper to extract and convert into LNG than reserves elsewhere in the projects.

The volume each project could extract from the shared area was set out in a 2015 “unitisation” - or resource-sharing - agreement. However both U.S. major Exxon and France’s Total are now renegotiating that contract with each other, the sources said.

The companies are looking to cut costs wherever they can, bruised by a COVID-19-induced collapse in global oil and gas prices and facing a worsening security situation in Mozambique.

Across the industry, most companies have been forced to delay decisions on new LNG projects and write down investments in existing production plants, in stark contrast to last year’s record level of approvals for plants.

Success in the talks could be particularly important for Exxon, which still has to woo investors ahead of a delayed final investment decision (FID) on its $30 billion Rovuma LNG project, which the sources now don’t expect until early 2022.

The FID on Total’s $20 billion Mozambique LNG project was made in June 2019.

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