africa commodities Energy Gas Mozambique Natural Resources

Opinion: Mozambique’s gas reserves will have the country firing on all cylinders

Approximate reading time: 3 minutes

Mozambique’s 100 trillion cubic feet proven reserve of natural gas – currently placing it on 12th place among the largest reserves in the world – is set to be the country’s main driving force as it gears towards rebuilding a brighter economic future.

Although the last 2 decades have seen significant improvements to its population’s living standards and – more recently – healthy economic growth, Mozambique still has an estimated 46,1% of people living below the poverty line. The nation’s most concrete and viable way of tackling these issues, however, lay underground this whole time. Once the massive natural gas reserves start producing, there is a lot of good news to look forward to: new enterprises, direct and indirect jobs and business opportunities are bound to shape the course of the next few years.

The Rovuma basin (in the northeast, near the border with Tanzania) concentrates most of the natural gas reserves found in recent memory, after 5 years of surveying and exploration, with a few offshore regions already undergoing plans for development and extraction by energy major players ENI and Anadarko.

In fact, in late 2012 both companies agreed on establishing an outline for each of their exploration areas and also co-develop the onshore facilities, further cementing their leading roles in this ambitious endeavour, on offshore Rovuma basin, with Anadarko securing Area 1, and ENI operating area 4 – also known as Coral Field – the two most prosperous natural gas reserves in the region.

Area 4, for instance, is the first project in the Rovuma basin to receive an environmental license, and the plan for its development was approved by the Government of Mozambique’s Council of Ministers on 24 February 2016.

Area 1 hosts the Prosperidade and Golfinho/Atum complexes, which further host several deepwater discoveries, including Windjammer, Barquentine, Lagosta, Camarao, Golfinho, Orca, and Atum, and  aims at initially supplying approximately 100 million cubic feet of natural gas a day (MMcfd) to the onshore LNG facility. It is expected to generate approximately between 400 and 700 jobs during the construction phase alone, which begins to illustrate a positive outlook on the potential of natural gas as an agent of change.

Standard Bank has recently carried out a study on the impact of liquefied natural gas developments in Mozambique’s economy, and concluded that there is a large potential for gas industry development, industrialisation, job creation and economic growth. According to the study, Mozambique seems to be at the “Tipping Point’’ of developing a natural gas-driven economy.

It is estimated that the development project of Area 1 alone will account for 56% of the country’s GDP by 2035, with per capita incomes seeing a leap from $382 in 2016 to $4,450 by 2035, provided Area 1’s project development keeps running at a steady pace. Additionally, tax revenue will see a substantial increase, both from income tax – as new jobs are created – as well as corporate tax from the aforementioned companies and other key players involved. Lastly, as incomes increase, so does the average household’s consumption and expenditure, bringing in even more revenue from indirect taxes, such as VAT.

Mozambique is particularly blessed when it comes to geographical location, as it is able to serve clients in the Asia-Pacific markets, as well as the ever growing energy demands of China and India. The only obstacle standing in its way towards a brighter, fairer future, is the frailty of the nation’s institutions, the ever present hand of corruption, and the leniency with which the rule of law can be bent and molded. But in the age of information, that is becoming less and less possible, and soon enough, Mozambique will certainly be firing on all cylinders, powered by gas.

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