“The less expected development which has happened this year is that the exploration companies like Eni have all now started to sell off their concessions for the discovered gas. They’re starting to cash in, at the same time, they’re making large profits,” SCP Africa’s portfolio manager Colin Waugh told CNBC Africa.
Integrated energy company Eni recently announced the discovery of gas in its Agulha exploration prospect in Area 4, just off the coast of Mozambique.
According to the company, preliminary estimates show that the Agulha structure could contain five to seven trillion cubic feet of gas. Eni and its joint venture partners are finalising the assessment of the discovery and planning the appraisal strategy.
“This brings it to their 10th discovery, the 10th drilled well in that area. It’s also a significant development for people in the industry because it’s so-called ‘wet gas’ this time, which means there’s also a possibility of oil discovery,” Waugh explained.
“The way that this can be monetised in terms of revenues and profits for the companies, and indeed in terms of royalties and taxes for the Mozambican state, is once the discoveries are turned into gas that can be brought onshore, and in turn transformed into LNG liquid natural gas for export.”
Waugh insisted that while oil and gas infrastructure in Mozambique may take some time to materialise, the offloading by exploration companies should yield its own rewards for the country.
“The LNG trains, as they’re known, which do this transformation, have yet to be constructed and its estimated to be a five to six year process – that really does mean there’s a considerable lag time in the receipt of these revenues, profits, and indeed these royalties,” he said.
“Between the three big sales that we’ve seen in the last 12 months, there’s an expected 900 million revenue in capital gains taxes accruing to the Mozambican government. This is going to be cash realised much earlier than any of the royalties and profit taxes that people have been worried about.”