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Anadarko: Mozambique FID?

For those paying attention, another interesting development took place today when Anadarko issued a press release (Link) stating that the company’s “Mozambique LNG” project and the Government of Mozambique intend to make a major announcement on June 18th. The document quotes Anadarko CEO Al Walker saying

“With commitments for financing in place, off-take secured, and all other issues under negotiation successfully addressed, we are excited to take the next step with the expected announcement of a Final Investment Decision (FID) for the Mozambique LNG project”

While Anadarko has been in the center of a yet to be finished takeover dispute between Chevron and Occidental Petroleum, much due to its Permian Basin assets in the US, I’ve always advocated that the consequences for the Mozambican project would be positive – either with Chevron and its operational experience or with Total SA assuming the project. (To be fair, this is my belief as I write this text, but at the speed things are moving I wouldn’t be surprise if that is no longer the case when I wake up tomorrow.)

To my surprise, a lot of people were shocked that Anadarko would take such a step in Mozambique in the midst of a takeover.

Yes, Mozambique LNG is operated by Anadarko and yes, they own a 26.5% working interest in the project. However, it puzzles me that speculators are not taking into consideration the remaining 73,5% ownership that have little (if anything) to do with the said merger.

The other shareholders in the project are Japan’s Mitsui, Thailand’s PTTEP, Mozambique’s own National Oil Company – ENH and India’s ONGC Videsh, Bharat and Oil India. These are serious market players that worked hard to get SPA agreements in place, arrange financing and to comply and sign the requirements of the local government.

I can only take as wishful thinking or naivety for someone to assume that this project would halt or be severely delayed due to Anadarko’s acquisition. There are definitely some collateral effects that we need to factor in, which will cause “some” delay.

For starters, an acquisition such as Anadarko, a company listed at the New York Stock Exchange, doesn’t happen overnight. It needs government approval and that takes time even in America. Meanwhile, if Mozambique LNG FID receives its green light June 18th, it will move forward as there’s no legal impediment until the government of Mozambique is formally informed of Anadarko’s intent to sell its share (or so I’ve been told). Of course, the Government of Mozambique will need to approve an eventual transfer of ownership and we’ve seen on the past that this may take sometime, yet, let’s not forget the state of their accounts.

Mozambique is very likely to get fiscally compensated for the sale of Anadarko’s Mozambique LNG shares. Given the economy’s rough couple of years and the recent natural disasters, any gains from this operation will be very welcome and much needed into their budget. I think that is enough of a reason for them to expedite any approvals.

Going back to the bidding war, according to a really insightful CNBC’s article by Tom DiChristopher, analysts think Chevron will counter Occidental’s offer but will not engage in a bidding war.

I remain positive on my opinion that the project will move forward no matter what. (and tomorrow is another day…)

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