Africa Development Energy ESG FDI Gas Mozambique Opinion Sustainability

Mozambique can realise full benefits of natural gas production

Written by Florival Mucave, President of Mozambique Oil & Gas Chamber.

For far too long, descriptions of Mozambique have contained some variation of the following: Mozambique one of the poorest Least Developed Countries in the world faces endemic droughts, floods and widespread poverty.

But we’re closer than ever now to change that narrative, to be able to say: by strategically managing its vast natural gas resources, monetising them, and harnessing them to industrialize the country and develop the private sector across the country, Mozambique is ushering in a new era of widespread economic growth and stability.

Unfortunately, not everyone agrees with this vision. A number of environmental organisations argue that the benefits of natural gas production in Mozambique are negligible and not worth the environmental costs.

Last month, African Energy Chamber CEO and Executive Chairman NJ Ayuk made a case for Mozambique to develop its natural gas resources to build its economy. He criticized some environmental groups—UK-based Friends of the Earth in particular — for attempting to interfere with the UK government’s US$1B funding commitment to Total’s Mozambique Liquified Natural Gas (LNG) Project. (Export credit agency UK Export Finance, had agreed to contribute funding because of the project’s potential to transform Mozambique’s budget and create jobs in the UK.)

Shortly after Mr. Ayuk released his piece, journalist Ilham Rawoot, who works for Friends of the Earth Mozambique (Justica Ambiental) and is the coordinator of the organisation’s No to Gas! campaign, responded with an equally passionate opinion piece opposing his stance. She took issue with Mr. Ayuk’s commentary on environmentalists’ interference and his views on the LNG potential benefits, and she asserted that Mozambique would be better off without natural gas production or LNG projects.

Also read: Mozambique LNG and its long-term growth prospects

I respect Ms. Rawoot’s right to express her views on Africa or any other matters.

I only wish that she, and others who are intent on saying “no to gas” in Mozambique, could start by making a thorough analysis on the pros and cons of Mozambique developing its vast natural gas reserves. The spillover and multiplying effects in terms of socio-economic development, from training and capacity building, employment, Government revenue, industrialisation through domestic gas utilisation and energy security. Natural gas production truly represents an opportunity for Mozambicans, and there are solid reasons to believe that Mozambique can take the steps necessary to reap significant benefits from the three LNG projects currently being developed here: the Total LNG project, valued at US$23B; the ExxonMobil-led Rovuma project valued at US$23.9B; and the US$4.7B Coral Floating LNG project. But not only that, I’ve witnessed the positive impact of natural gas industries in other jurisdictions, from Trinidad and Tobago, Qatar, Nigeria, Australia, Norway and the United States of America. These are some of the reasons I’m confident when I say Mozambicans can shift our country’s trajectory for the better: We can transform our reality from poverty despite our resources to prosperity because of them.

We need this opportunity

From my perspective, we should welcome Mozambique’s natural gas industry and LNG projects, more importantly, because there is empirical evidence demonstrating that in Mozambique, the tangible benefits resulting from LNG projects, outweigh by far any negative impact.

Currently, economic opportunities in Mozambique are at a minimum, and natural gas production has the potential to simultaneously meet multiple pressing needs: job creation, capacity building, economic diversification, access to power and more importantly, poverty alleviation.

In order to have sustainable economic development, through industrialisation, Mozambique needs to increase access to power. The Mozambican Petroleum Law 21/2014, states that” Petroleum resources are assets whose proper exploitation can contribute significantly to national development”. This position is also echoed in the Mozambican Gas Masterplan, which suggests that the Government of Mozambique should develop natural resources in a manner that maximizes benefits to Mozambique’s society, in order to improve the quality of life of the people of Mozambique, while minimising adverse social and environmental impacts.

So many of our struggles in Mozambique are rooted in our lack of reliable electricity: Only 29% of our population has access to power. In order to tackle the limited access to power by Mozambicans, the Petroleum Law 21/2014, incorporates a clause on domestic gas, according to which, 25 % of the natural gas produced in Mozambique must be used domestically. As a result of domestic gas obligations we are starting to see sizeable new investments in gas to power projects in Mozambique, such as the Ressano Garcia CTRG Project, the Kuvaninga project, the upcoming Temane Regional Electricity Project, which will include a 400-megawatt gas-fired power plant and the planned 250-megawatt electricity plant in the Nacala district that will be fueled by gas from Mozambique’s Rovuma Basin.

Keep the long game in mind

In her opinion piece, Ms. Rawoot states that few of the construction jobs for the Total’s LNG plant have gone to locals, and she’s right. But to be fair, the LNG industry in Mozambique is in its infancy and we don’t yet have the trained labour force capable of participating in the oil & gas industry.

As much as we would love to have a 70% majority of Mozambicans building everything, we still need international companies with the necessary skills to get the work done on time and on budget.

Training is underway, but the experience and technical know-how are not there yet.

However, that doesn’t mean we should kill the projects. We have to push forward, and at the same time, work on building local content laws that promote the inclusive participation of Mozambicans in the oil & gas industry. I hope we’ll see the western environmental community supporting these efforts. They can be a powerful and important voice on the importance of local content that promotes the inclusive and sustainable participation of Mozambicans in the oil & gas projects.

When the Mozambican Oil and Gas Chamber and the African Energy Chamber talk about job creation from LNG projects, we’re not simply referring to construction jobs. We’re also talking about qualified and highly skilled jobs in the plants once they’re operational, jobs with local companies contracted by the plant, and also, jobs created as Mozambique harnesses its natural gas industry to industrialize its economy.

Also read: Mozambique: Plans for Sovereign Wealth Fund outlined

Gas is only the beginning

The tourism industry in Southern Africa was growing exponentially before Covid-19 and will return to growth after the pandemic. Mozambique’s, natural gas can be a catalyser for the growth of the tourism industry. The Mozambican Government has tourism as one of its economic pillars and although the tourism industry has been severely hurt by cyclones and Covid-19, its great potential remains untapped.

Despite its great potential, Mozambique’s tourism industry will not be able to grow and flourish without reliable power. Even with our pristine beaches, and some of the most beautiful islands in the world, only a few tourists will come if we don’t have reliable power. We want tourists to be able to enjoy our beautiful country, and we want a dynamic tourism sector that contributes to long-term economic growth and job creation. To achieve that, we need reliable power, we need infrastructure. Mozambique can achieve all of that with LNG production and revenue.

The impact of natural gas production in Mozambique on the agriculture industry

In its five years economic plan, the Government of Mozambique indicated agriculture as its top priority. Currently, nearly 80% of our population works in the agricultural sector, and it generates about 25% of our GDP.

However, due to low productivity levels, too many of our farmers still live in abject poverty. That can be changed, though. Simply by using fertilisers, farmers can enhance their yield by nearly 40%. While imported fertilizers are too expensive for the majority of our farmers, Mozambique can create a more affordable option. By building infrastructure to transform natural gas into nitrogenous fertilisers, not only would Mozambique help its farmers, but it would also create local job opportunities. Mozambique could reduce significantly its imports of agricultural products from South Africa and become an affordable source of food for domestic consumption.

Natural gas Monetisation is doable

I understand why some are skeptical about Mozambique’s ability, and resolve to manage LNG revenues in a way that benefits our population. It’s true: The oil and gas industry hasn’t always been good for Africa’s people. We have seen our share of government rent-seeking and corruption in the African continent. We’ve also seen the impact of the resource curse, even pre-resource curse. This is why the Mozambique Oil and Gas Chamber, Mr. Ayuk, the African Energy Chamber and other African Oil and Gas Organisations are working together to change the gloomy narrative of the oil & gas industry in Africa. We are new African voices in the industry, committed to transparency, good governance, economic growth and sustainable development.

I am certain that Mozambique can benefit from the painful lessons some African petroleum-producing countries have learned up to now, from disastrous policies to successful diversification of their economies. We can also learn from positive examples, such as the twin-island of Trinidad and Tobago, which like Mozambique, has sizeable reserves of natural gas. Government initiatives in Trinidad and Tobago led to significant foreign investment into downstream, gas-based projects. And that, in turn, sparked increased activity in the construction, distribution, transport, and manufacturing sectors.

Looking at emissions in proportion

Naturally, protecting the environment is a major concern of Ms. Rawoot, Justica Ambiental, and similar organisations — and it’s very important to us.

Global electricity demand is expected to increase by 70% by 2035, gas-fired generation almost doubling to facilitate this. It is also expected that the share of natural gas in the global energy mix will be higher than that of coal and oil by 2035.

The projected growth in the energy sector has to take into account the growing concerns regarding climate change. But, combating climate change effectively should not conflict with human progress and poverty alleviation.

With regards to natural gas, its scope in the reduction of carbon dioxide (CO2) emissions is significant, as natural gas with lower default carbon content of 15.3 Kg/GJ, is a cleaner option compared to coking coal (25.8 Kg/GJ) and crude oil (20 Kg/GJ). Natural gas is indeed an option for delivering industrial emission targets. In other words, natural gas is a bridging fuel by providing a low-carbon energy alternative to other fossil fuel sources.

What about the potential environmental impact of using natural gas to power in Africa?
It has been estimated that if we triple electricity consumption in sub-Saharan Africa, all with natural gas, we would produce the equivalent of 0.62% of annual global emissions — less than the average yearly global increase over the last decade.

In Mozambique, given our natural propensity for cyclones and other natural disasters, protecting our natural habitats and wildlife as well as keep the planet healthy for future generations has long been a priority, and will remain one. However, rather than discarding LNG projects, we should be working together to find a way to develop them in an environmentally responsible manner.

Mozambicans do have a say in the Afungi Relocation Process

In her opinion piece, Ms. Rawoot argues that Total’s LNG plant not only represents an environmental threat but also one to local people and communities. Total, she writes, took the homes of 556 families for their LNG plant project and failed to compensate them fairly. Those claims are unfounded. This is a matter that was comprehensively discussed between civil society and the Mozambican Government.

Currently, the government is engaged in productive conversations with citizens and businesses on this matter. Furthermore, the oil and gas companies in Mozambique have been very sensitive to issues that impact communities and have encouraged communities to be active in the land acquisition process, a process that includes relocation, compensation, restoration of livelihoods and the creation of a community development fund for resettlement-affected communities. Additionally, through a non-government organization (NGO), legal assistance has been provided to households signing compensation and resettlement agreements.

Also read: UN and Japan to support communities displaced by in Cabo Delgado, Mozambique

Let’s remove a motivator for violence

I won’t deny Ms. Rawoot’s point that Mozambique has struggles, including armed conflict and terrorist attacks. Insurgency in Cabo-Delgado is a fact and there is no simple solution to this dilemma. I do however believe that our government in partnership with the civil society and international community will reach a durable peaceful solution, a sine qua noncondition for the viable exploitation of natural gas in Cabo-Delgado.

I also agree with journalist Oscar Kimanuka of Rwanda, who recently noted that unemployment in Northern Mozambique may be a key factor for youths to join the extremists.

It seems logical, then, that creating employment opportunities could, at least, make it more difficult for extremist militant groups and terrorists to recruit our young people. Therefore, harnessing our natural gas resources to grow our economy is a sustainable solution.

Mozambicans deserve chance to help themselves

I understand that Mozambique has its share of complex challenges, and natural gas isn’t a perfect solution. At the same time, it is preposterous for Ms. Rawoot to suggest that Mozambique must jeopardise a projected LNG investment of approximately US$55B, equivalent to four times the size of the country’s GDP and forgo Government revenues over the next 25 years that are estimated to increase by US$4-5B per annum.

Mozambique cannot afford to continue being a country where our Government budget depends on international donor’s goodwill. We want Mozambicans to have the dignity of work and of building an inclusive and respectable nation. Harnessing natural gas to address poverty alleviation is a suitable solution.

Source: AiThority via Club of Mozambique

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