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Galp’s chief remains bullish over Mozambique’s LNG

Mozambique is ready to fill a looming gap in global supplies of liquefied natural gas but must avoid the cost overruns that have plagued Australian LNG projects, says the chief executive of Galp.

Carlos Gomes da Silva said the “next decade should be the Mozambique decade,” as the east African country brings its first LNG to market from 2022 onwards. Galp of Portugal has a 10 per stake in the Coral South gas project in Mozambique, which was given the go-ahead last year together with partners including Eni of Italy and Kogas of South Korea. Coral is part of the wider Mamba gas complex, which Eni is planning to develop in phases with ExxonMobil of the US, including onshore liquefaction facilities. “Coral puts Mozambique on the map but Mamba will be the anchor,” said Mr Gomes da Silva, without being drawn on when the next stage of the project would be approved.

“We are still working to optimise [Mamba] to see if we can make it even more competitive,” he added. “We want a robust project rather than setting a clock ticking [by rushing to develop too soon].” Mozambique is seen as the next big frontier for LNG development after a wave of new production from Australia. “We have to make Mozambique different to Australia,” said Mr Gomes da Silva, referring tho the multiyear delays that left projects such as Chevron’s Gorgon and Wheatstone billions of dollars over budget. “We have to be competitive with [LNG from] the Middle East, north Africa and the US,” he said. “We’re in a good position but we have to execute it well.” Mozambique has relatively benign conditions compared with Australia, Mr Gomes da Silva said, noting that its offshore resources are much closer to shore. The influx of supplies from Australia as well as rising exports of US shale gas has created a glut of LNG in the global market. However, Mr Gomes da Silva said that would change in the 2020s as new projects dry up while gas consumption in China and other emerging economies continues to grow strongly.

“There will be a gap in global LNG demand and our project fits that gap well,” he said. We are an active non-operator with high-quality teams capable of adding value Carlos Gomes da Silva Coral South and Mamba are among a group of new projects that have given Galp one of the best growth outlooks in the European oil and gas sector. Its production rose by 38 per cent last year to 93,000 barrels per day and Mr Gomes da Silva has set a goal to keep output growing at an average 8 per cent a year to 2030. The biggest source of growth will be Brazil, where cultural and linguistic ties have helped the Portuguese group to build a strong portfolio of assets in the country’s prolific pre-salt offshore oilfields.

“We feel at home in Brazil,” said Mr Gomes da Silva. “Brazil has only recovered 20 per cent of its potential resources, so there is still a lot to do.” Galp is also active in Angola, another former Portuguese colony like Brazil and Mozambique. The group does some exploration of its own but its main success has come from stakes of 10-20 per cent in other companies’ projects.

“We are not anxious to be an operator,” said Mr Gomes da Silva. “We are an active non-operator with high-quality teams capable of adding value.” Analysts at BMO Capital Markets said the strategy was paying off. Galp’s rising production was “in a different growth league to all its peers,” while the 10 per cent increase in its 2017 dividend was also highest among peers, according to BMO.

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