Chevron-Anadarko: the overlooked jewel

As Chevron swallows up its USD50 billion acquisition of Anadarko, OGInsights turns its focus away form the heavily covered synergies in the Permian, DJ Basin and Gulf of Mexico, and towards its LNG portfolio as Chevron strives to join the ranks of the supermajors in LNG.

Chevron has a Australasia-centric LNG business, but Anadarko's 27% operated interest in Mozambique Area 1 now broadens the former's reach. The Mozambique position is a low cost, integrated LNG project in an ideal geography with reach into the European and Asian markets.

Area 1 is close to FID with c.9.5mtpa of its 12.88mtpa capacity already signed up. The stepping in of Chevron into Anadarko's shoes adds further weight behind the project. 

In February, it was noted that Anadarko had signed a 2.6mtpa LNG SPA with Tokyo Gas/Centrica
joint agreement with implicit destination flexibility which will help broaden Chevron's LNG marketing portfolio, although it is yet to fully launch its own trading portfolio like the Shells and Totals of this world.

The Area 1 LNG joint venture in Mozambique comprises Anadarko, Mitsui, ONGC, ENH (Mozambique NOC), Bharat PetroResources, PTTEP and Oil India. In addition to the Area 1 development, the Area 4 joint venture between Exxon and Eni is on track for sanctioning later in 2019.

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Anadarko signs SPAs for Mozambique LNG

Anadarko has signed three gas Sale and Purchase Agreements (“SPAs”) with Tokyo Gas/Centrica (2.6mtpa), Shell (2mtpa) and CNOOC (1.5mtpa) for its Mozambique LNG Area 1 development. This total 6.1mtpa of the planned 12.88mtpa ahead of FID expected in mid-2019. The LNG development will challenge upcoming projects given its fortunate location in between the Asian and European markets and will compete with Australian, Middle Eastern and North American suppliers.

These SPAs are conversions of existing Heads to Terms and there could be more SPA announcements on the way. Anadarko has made clear that it expects to debt finance c.USD12 billion of the USD20 billion Phase 1 development and these SPAs will help to support that financing.

The owners of Mozambique LNG Area 1 are:

Separately, the Area 4 LNG JV between ExxonMobil and Eni is also on track for sanctioning later in 2019.

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Anadarko close to Mozambique Area 1 FID and raising USD12 billion debt financing

On 26^th April, Anadarko had "in principle" secured sufficient offtake to enable FID of the first phase of Mozambique LNG on Area 1 offshore Mozambique. The huge resource of 75 tcf is planned to be initially developed via two trains with capacity of 12.88 mtpa. In time, this could eventually be expanded to eight trains producing 50 mtpa.

Since the announcement, Anadarko has also made clear that it expects to debt finance ~USD12 billion of the USD20 billion Phase 1 development, mainly from export credit agencies or ECAs.

In March, Anadarko noted that it had secured 5.1 mtpa of offtake and was close to achieving the 8.5 mtpa needed for FID. It is clear that the company is now very close or has surpassed that threshold with remaining efforts on converting heads of terms and discussions into signed SPA contracts.

Offtakers include a range of Chinese, Japanese and other NOC buyers as well as utilities. It has been reported that deals include France’s EdF, Thailand’s state-run PTT and Japanese utility Tohoku Electric.

This is a good piece of news for Mozambique LNG which is finally showing signs of moving ahead and follows finalisation of development concessions with the Mozambique government last year. The Area 1 FID could potentially overtake ExxonMobil's Area 4 project, in which ExxonMobil acquired a 25% from Eni in 2017 (the deal closed in December 2017).

Area 1 ownership stakes
Source: Bloomberg, Mozambique LNG

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