Samsung Heavy Industries is expecting news of a contract for a liquefied natural gas (LNG) project in Mozambique, one of Africa's largest gas reserves.
According to the shipbuilding industry on the 18th, Samsung Heavy Industries is currently working on the production design for the Coral Sul FLNG-2 in Mozambique. FLNG refers to floating liquefied natural gas production, storage, and offloading facilities, and the contract amount is expected to be around $2.5 billion (about 3.6 trillion won). If the contract is finalized within the year, Samsung Heavy Industries is expected to exceed its annual order target of $9.7 billion for this year. Samsung Heavy Industries has secured five out of seven FLNGs ordered globally, positioning itself in a unique place.
Since the discovery of a large gas field off the northeastern coast of Cabo Delgado Province in Mozambique in 2010, three LNG projects have been pursued. According to a report released earlier this year by consulting firm Deloitte, Mozambique's natural gas reserves are estimated to generate $100 billion (about 143 trillion won) in revenue in the future.
The first project to be completed and become operational is the Coral South project, which Samsung Heavy Industries secured in 2017 as part of a consortium with Technip of France and JGC of Japan. The Coral Sul FLNG-1 has an annual LNG production capacity of 3.4 million tons in Block 4. In 2021, the President of Mozambique visited Samsung Heavy Industries' Geoje shipyard and attended the naming ceremony for the departure of Coral Sul FLNG-1, the first FLNG vessel for the Mozambique gas field, which began production the following year.
Currently, the Coral Sul FLNG-2, for which Samsung Heavy Industries is anticipating a contract, is a follow-up project to the first unit (Coral North). It will also be involved in developing the deep-sea gas in Block 4. A representative from Samsung Heavy Industries noted, "The basic design for Coral Sul FLNG-2 is the same as that of the first unit, and we are currently in the production design stage," adding, "Although there is little time left until the end of the year, we are hoping for a contract within this year."
The third project is the LNG carrier project for Block 1. In 2020, Samsung Heavy Industries secured eight LNG carriers to transport LNG extracted from Block 1 from France's TotalEnergies, while HD Hyundai secured six. However, due to the armed attacks by Islamic militants in 2021, the project's progress became unstable, leading to an indefinite suspension. Recently, TotalEnergies and its partner, Japan's Mitsui & Co., have been creating an atmosphere for the project to resume.
According to Japanese media, Kenichi Hori, president of Mitsui & Co., mentioned on the 5th, "We are in the final stages of coordination with TotalEnergies and the Mozambican government to resume construction of the LNG project." The key point is securing funding for the project. Earlier in October, Patrick Pouyanné, CEO of TotalEnergies, expressed his commitment to resume the project, stating that 70 to 80% of the $14 billion to be secured from financial institutions has already been confirmed.
If the project is resumed, there are expectations that Samsung Heavy Industries and HD Hyundai will pursue final contracts for LNG carrier construction. The shipbuilding industry believes that there is a high possibility contracts will be signed at prices higher than four years ago. When the contracts were awarded in 2020, the total contract amount for the two companies was around 3 trillion won, but recently, as newbuilding prices have surged to their highest level ever, it is expected that they will be able to raise the price of the vessels. Once TotalEnergies completes negotiations with the Mozambican government for the project resumption, Samsung Heavy Industries is expected to enter into renegotiations with TotalEnergies regarding the construction of LNG vessels.
However, according to local African media, there are discussions that the timeline for TotalEnergies' LNG project resumption may be postponed to mid-next year. Africa Intelligence reported on the 13th that "TotalEnergies might be able to resume the LNG project by May or June next year." Africa Intelligence suggested that after the inauguration of the second Donald Trump administration, it will be necessary to first secure funding guarantees from the Export-Import Bank of the United States.