Mozambique's LNG Development: Navigating Challenges and Embracing Opportunities
- Mozambique | 14 November 2020
Mozambique, a nation plagued by a series of unfortunate events in recent years, is now poised for a transformative change in its fortunes. Despite the financial crisis caused by the Tuna Bonds scandal in 2016 and the devastating impact of tropical cyclones Idai and Kenneth in 2019, the discovery of vast deposits of non-associated gas in the Rovuma Basin has opened doors to a brighter future of economic growth. However, challenges loom on the horizon, including the need for substantial investment, the threat of terrorism, and the ever-changing dynamics of the global gas industry.
The Rovuma Basin has become the center of attention, attracting major international players in the liquefied natural gas (LNG) sector. Total’s announcement in July 2020 that it had secured a staggering US$15.8 billion for the development of Area 1 marked a significant milestone. This foreign direct investment surpassed Mozambique’s entire GDP and showcased the immense potential of the country’s LNG development. Furthermore, with Exxon’s Area 4 final investment decision (FID) expected in 2021 and Eni’s investment in the Coral South project, the cumulative investment is projected to be more than triple Mozambique’s GDP.
Total’s project encompasses the development of the Golfinho and Atum fields in the offshore Area 1 concession, which holds over 60 trillion cubic feet (tcf) of gas. The construction of a liquefaction plant with a capacity of 13.1 million tons per annum is also part of the plan, with initial production anticipated by 2024. The project’s scale is unprecedented, attracting substantial financing from institutions like Standard Bank, which invested US$485 million in the Mozambique LNG project. However, the development of Rovuma LNG has not been without obstacles. The COVID-19 pandemic has caused a decline in gas prices and reduced investment capital across the industry. Additionally, Mozambique faces a rising extremist insurgency by Ahlu Sunnah Wal Jammah (ASWJ) militants, who have targeted key locations such as the port of Mocimboa da Praia, vital for the logistics of Mozambique LNG. The Mozambican military’s lack of resources and funding has allowed the insurgency to persist, raising concerns among stakeholders involved in the project.
Despite these challenges, work has continued at the Rovuma LNG site, driven by the determination of both local and international players involved. Total has chartered multiple flights to transport workers, demonstrating a commitment to progress. Nevertheless, the security situation remains a significant concern. The Mozambican government and private industry must collaborate to address the insurgency effectively and ensure a safe operating environment for all involved in the project.
Mozambique’s LNG development in the Rovuma Basin offers tremendous potential for economic growth and prosperity. The investment secured from major international players highlights the confidence in the project’s viability. However, challenges persist, including the need for ongoing investment, the impact of global market dynamics, and the threat of terrorism. It is crucial for all stakeholders, including the government, private industry, and international partners, to work together to overcome these challenges and create a secure environment for the successful realization of Mozambique’s LNG ambitions. With coordinated efforts and proactive measures, Mozambique can navigate these obstacles and pave the way for a prosperous future driven by its LNG resources.