Vitol, the world’s biggest independent oil trader, has launched an energy trading venture with Mozambique’s national oil company, ENH, focused on trading future LNG, LPG and condensates volumes from the East African country’s huge offshore gas developments.
Based in Singapore, ENH Energy Trading will market LNG, LPG and condensates and other energy commodities focused on Asian markets, where LNG demand is expected to “grow significantly,” Vitol said in a statement.
As part of the deal, Vitol said it has committed to helping Mozambique develop an independent and leading marketing and trading team under ENH Energy Trading. The trading venture will initially be owned 51% by state-run ENH, with Vitol holding the remaining 49% interest. But ENH’s share is expected to increase “over time,” Vitol said.
“We very much look forward to replicating our previous experience of partnering with an NOC and working with ENH to build ENH Energy Trading into a successful trading company with the expertise to serve Mozambique’s energy needs,” Vitol CEO Russell Hardy said in a statement.
Giant offshore fields
Mozambique is developing an estimated 125 Tcf of recoverable gas resources from giant offshore fields with Total, ExxonMobil and Eni among the main foreign partners. The first phase of development will produce significant quantities of gas, LPG and condensate, plus over 30 million mt of LNG annually, making Mozambique a leading exporter of LNG.
The Vitol venture with Mozambique follows similar moves by NOCs such as Saudi Aramco and the UAE’s ADNOC in recent years to take more direct control of marketing their huge oil and resources by building global trading operations.
“Our expectation for this JV is to embark on a path into international commodity trading markets to support our growth,” ENH chairman Omar Mitha said in the statement.
LNG Trading push
With natural gas set to be the fastest-growing fossil fuel in the coming decades, energy traders are building out their asset-backed trading models to capture value from booming flows of both piped and LNG gas trade. Switzerland-based energy trader Gunvor became the biggest independent LNG trader last year after delivering about 11 million mt, a 60% jump from 2017. Around two-thirds of Gunvor’s volumes delivered were under medium- and long-term contracts.
Commodity trading rivals Trafigura and Vitol have also seen substantial growth in their LNG trading volumes in recent years, signing long-term deals with US shale gas producers.
Vitol saw traded volumes in its LNG business grow to 7.8 million mt in 2018, up from just 3 million mt two years earlier. It is looking to build an LNG import terminal on the Italian island of Sardinia, and Trafigura is working to reintroduce an LNG import site at Teesside in northeast England.
Mozambique LNG project
In June, the former operator of Mozambique ‘s Offshore Area 1 area, Anadarko, reached a final investment decision on the 12.8 million mt/year Mozambique LNG project, with production expected to start up around 2024.
The second major LNG project off Mozambique is the 15.2 million mt/year Rovuma LNG plant led by an Eni-ExxonMobil joint venture that is expected to reach FID by year-end. Eni and ExxonMobil have already sanctioned Mozambique’s offshore Coral South floating LNG project in Area 4 which, is expected to come onstream in 2022.
ENH holds a 15% stake in Total’s Area 1 project and a 10% interest in the Eni-Exxon development of Area 4.
Source: S&P Global Platts