By Sabina Zawadzki
LONDON, March 21 (Reuters) - Mozambique, one of the world'spoorest nations, is set to become a top global gas exporterthanks to two huge terminals about to be built in a northernprovince.
The two liquefied natural gas (LNG) projects, by Anadarkoand Exxon Mobil, will extract, liquefy and shipgas, found in such quantities offshore Mozambique that itamounts to a decade's worth of European consumption.
But the plans by the U.S. companies diverge in theirfinancing, marketing and shipping strategies, reflectinguncertainties in a growth industry that has yet to achieve theflexibility and liquidity of its sister crude oil market.
Exxon will use its might as a decades-old LNG producer witha 20-million-tonne portfolio to partially pay for the projectand absorb the LNG - together with its equally hefty partners.
LNG novice Anadarko, meanwhile, has had to go through thetime-consuming process of locking in long-term buyers for itsgas and multi-billion-dollar financing from banks mindful ofMozambique's 2016 credit default and geopolitical hazards.
For this reason, Anadarko's project has been fully exposedto risk assessments made by buyers and financial institutions.
"I think what they've done is built the first project thatacross the board responds to the shifts to contract structuresand pricing and how you finance an LNG project," said Jason Feerof Poten & Partners, an industry consultancy.
Although the gas projects are 1,000 km (600 miles) north ofBeira, the town at the heart of the devastation caused by acyclone and floods last week, the country's poor infrastructureand flare-ups of violence are also large risks.
Industry insiders say Anadarko will avoid the fate ofLondon-listed Ophir Energy, which ended up losing itsEquatorial Guinea licence, its chief executive and over $300million after it failed to get financing for its LNG project.
But concessions have been made by Anadarko and its partnersMitsui, Mozambique state energy company ENH, Thailand'sPTT and Indian energy firms ONGC, BharatPetroleum Resources and Oil India.
ANADARKO'S CONCESSIONS
Anadarko had to seal binding contracts with long-term buyersof the LNG it plans to produce to present to banks as proof ofthe venture's viability before receiving financing for what ithopes is two-thirds of the cost of the $20 billion project.
But in a fast-expanding, volatile market, such multi-year,multi-billion-dollar commitments are difficult to clinch.
"There are multiple price indexations, some flexibility interms of volumes and there are a variety of contract durations,"said Gary Regan of industry consultancy Gas Strategies.
"Those are some of the ways in which they had to provideconcessions to buyers during negotiations."
Over 9.5 million tonnes a year (mtpa) of the project's 12.88mtpa capacity is committed to eight buyers from seven developedand developing countries with various credit ratings, includingutilities, major LNG portfolio holders and two state companies.
The contract duration varies from 13 to 20 years and volumesrange from 0.28 mtpa to 2.6 mtpa.
All of the contracts are on a delivered ex-ship (DES) basis,Anadarko told Reuters, which means the company needs to organiseLNG shipment. This is risky as the LNG tanker market, tiny andundeveloped by global shipping standards, is volatile,experiencing record-high charter rates last year.
Finally, Anadarko had to lock in lower LNG prices than inthe last wave of projects. One source familiar with the matterpegged Anadarko's prices above 11 but below 12 percent of Brentcrude oil, compared to 14 percent five to seven years ago.
Anadarko said its contracts had exposure to crude oil andgas index-linked prices but declined to comment further.
There is every chance Exxon too will face low prices for itsLNG but as it need not lock them in now, it can market the gaswhen it chooses to do so and for the best price.
"Balance sheet financing by majors such as Exxon enablesprojects to proceed at optimal timing regarding contractstrategy and market openings," Credit Suisse analyst SaulKavonic said.
Exxon did not immediately respond to a request for comment.
RISK IT LATER
Anadarko said it would take a final investment decision(FID) by June thanks to the offtake agreements it now hasproviding the financing is agreed - still a significant hurdle.But once it does, it has a smoother path to production, due in2024.
"We are well placed to meet the objective of taking FID inthe first half of this year," an Anadarko spokeswoman said.
Exxon, meanwhile, has effectively pushed back the riskAnadarko has had to face today closer to the start date of itsown project, also 2024.
Together with partners Eni, the Italian major fromwhich it took over the project in December 2017, LNG buyer KoreaGas Corp and state-owned China National PetroleumCorp, Exxon will take on the LNG volumes itself in a bet thatthere will be sufficient demand in 2024.
Exxon is also seeking project financing but its experience,robust balance sheet and eager LNG consumers as partners, meanfinding money will be easier, industry sources say.
Here, Exxon is like Royal Dutch Shell, which hasthe world's largest LNG portfolio and which took FID on the $30billion LNG Canada project in October with few buyers signed.
"The majors have kind of had to make a judgment call," saidFreer of Poten & Partners.
"They've had to decide they're not going to be in the LNGbusiness because they don't have the pre-sales, or they've hadto take more risk on the balance sheet. And the decision is theybelieve the demand for LNG is there."($1 = 1.3300 Canadian dollars)
(Reporting by Sabina Zawadzki; Additional reporting by JessicaJaganathan in Singapore; Editing by Dale Hudson)
