ROME: Italy’s oil and gas major Eni has contacted banks to ask billions of U.S. dollars to finance the development of the huge Coral field offshore Mozambique, Reuters reported on Tuesday, citing the company and sources. Eni has confirmed to Reuters that its representatives had met with bankers in London last week.
Mozambique’s government had approved in February of this year the development plan for the first phase of development of 5 trillion cubic feet of gas in the discovery. Eni estimates that the Coral discovery contains about 16 trillion cubic feet of gas in place. The company plans to produce 140 billion cubic meters of gas through the construction of a floating plant for the treatment, liquefaction and storage of gas (Floating LNG – FLNG) with a capacity of 3.4 million tons per year, with the start-up expected in 2021. Eni expects the final investment decision (FID) this year, and bank funding would be one of the last stages before Eni can make that decision. According to Reuters sources, the banks may present Eni with their loan terms within a month, and they will also be seeking credit guarantees from governments such as the UK and Chinese ones.
This credit guarantee requirement should not come as a surprise, given the fact that the investor climate in one of Africa’s poorest countries has significantly deteriorated in recent months, with clashes with guerrillas and an avalanche of financial scandals weighing on the foreign companies’ investment decisions and project timelines.
Mozambique has run into major debt woes, which have threatened to derail its LNG hopes. The African country was also involved in a scandal over loans the authorities had failed to disclose to the International Monetary Fund. The IMF continues to work with Mozambique on reforms and policies after the disclosure of the hidden loans. The IMF, however, has suspended lending to Mozambique and demands external audits of the country’s finances before returning to extend financial aid.
