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China Bags Oil E&P Contracts Off Mozambique

CNOOC rig in the sunset
File image courtesy CNOOC

Published May 26, 2024 6:05 PM by The Maritime Executive

 

China’s footprint in the African energy sector continues to expand, with Mozambique last week approving oil exploration and production contracts for CNOOC (China National Offshore Oil Corporation) subsidiaries, covering five blocks. CNOOC signed the concession contracts with Mozambique’s Ministry of Energy and the state-owned national hydrocarbons company (ENH).

The blocks span an area of 11,000 square miles, with exploration water depths starting from 500 to 2,500 meters. All the blocks are located in the Angoche and Save Sediment Basin offshore Nampula province.

According to the terms of the contracts, the first stage of the exploration period for the blocks will be four years. Five wholly owned subsidiaries of CNOOC Limited will act as the operators in the exploration and development phases, with independent operator rights and interests in the blocks. ENH will own the remaining non-operator interests.

Speaking during signing of the contracts, Mozambican Minister of Energy Carlos Zacarias said that the CNOOC deal represents a huge success in fulfilling the government’s five-year program 2020-2024 in the mineral resources and power sector.

According to Mozambique’s energy sector regulator, the National Petroleum Institute (INP), CNOOC will carry out an intensive exploration work program, including acquisition of 1000 miles of 3D seismic data and drilling of a minimum of four deep-water research wells in the designated offshore regions.

In 2021, the government launched the sixth bidding process for concession of areas for hydrocarbons exploration and production, which has so far received positive response from energy multinationals. Some of these companies include TotalEnergies, ExxonMobil, ENI, and now the addition of CNOOC.

According to exploration data of these firms, Mozambique is tipped to become a major exporter of LNG, especially after the discovery of over 180 trillion cubic feet of natural gas reserves in the Rovuma basin, further north of the Angoche site. The first LNG shipment destined for Europe departed Rovuma Basin in November 2022. This was a successful attempt by Mozambique to monetize its vast hydrocarbon reserves.

Unfortunately, a rising wave of insecurity in Mozambique’s Cabo Delgado province could deter the ongoing energy projects in the region. Almost three years ago, TotalEnergies was forced to suspend operations on a multi-billion LNG project at the Afungi site in northern Mozambique. At the time, Islamic insurgents escalated attacks in the nearby town of Palma, where many sub-contractors for the Afungi site were based.