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With eye on Asia, Mitsui plans $1.5bn Mozambique gas investment

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Trading house in talks with Thai and Chinese customers as demand grows

Trading house Mitsui & Co. plans to invest roughly $1.5 billion in Mozambique to jointly develop what is estimated to be one of the world’s largest gas fields.

The Japanese company is shifting its focus from coal to liquefied natural gas as demand for environmentally friendly energy sources grows. It plans to supply LNG from the African project to Tohoku Electric under a long-term contract and is negotiating with companies in Thailand and China as well.

Mitsui will work with Texas-based Anadarko Petroleum, Mozambique’s state-owned oil concern and others to develop the oil field, which has an estimated reserve of 50 trillion to 75 trillion cubic feet. This amount is three to four times that of another project site where Mitsui has a role, Sakhalin-II in Russia, and among the largest in the world. The total project cost is estimated at $15 billion.

Mitsui obtained an interest in the project in 2008. But its decision to invest had been put on hold as oil prices had fallen. The company now aims to take advantage of growing demand in emerging countries. A formal decision will likely be made within this fiscal year.

LNG production is scheduled to begin around 2023, with an annual output of 12 million tons. Buyers are being secured for roughly 9 million to 10 million tons, Mitsui President Tatsuo Yasunaga told Nikkei.

The LNG plant’s design has been entrusted to a consortium including Japanese engineering company Chiyoda. “We are not satisfied with the current levels of costs,” Yasunaga said, suggesting that Mitsui will seek further cost reductions.

Mitsui will place less emphasis on coal out of environmental considerations, Yasunaga said, and will reshuffle its assets of roughly 2 trillion yen in the energy business. “Focus is shifting from oil to gas,” he said.

With its energy and metals operations vulnerable to market fluctuations, the company is also working to expand its nonresources businesses.

Resources operations generated around 70% of Mitsui’s net profit for the year ended in March 2018. The company aims to cut that figure to 55% in fiscal 2019.

“We will obtain assets necessary for growth,” Yasunaga said, indicating that the company is considering mergers and acquisitions. In January, it purchased apparel company Bigi Holdings in collaboration with an investment fund. Earnings from resources businesses will be funneled to nonresources operations.

Mitsui also considers transportation a growth field and anticipates a faster-than-expected adoption of electric vehicles. “We have to be an active player,” Yasunaga said.

The company will deepen collaboration with automakers in such areas as procuring materials for storage batteries and making vehicles lighter.

Source: Nikkei Asian Review

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