Fitch Solutions said yesterday that insecurity in northern Mozambique will lead US oil company ExxonMobil to postpone the Final Investment Decision (FID) to 2023, hampering the country’s economic growth.
“Due to persistent militant activity and uncertainty regarding the project’s financing, we are skeptical about ExxonMobil’s Rovuma LNG project starting to bear fruit in the short term, and consequently we do not anticipate an FID until 2023, with the risks leaning to the negative side” the analysts believe.
In a commentary on the situation of insecurity experienced in the province of Cabo Delgado, Fitch Solutions’ analysts point out that, “notwithstanding the insurgency in the country still posing a threat to the development of the liquefied natural gas sector, the three projects planned for the country should start operating, despite the risks”.
Regarding Total’s project, an investment of over US$20B near Palma, the city attacked on March 24, Fitch Solutions expects the French oil company to resume work as soon as possible, but warns that their Area 1 project “suffers from increasingly greater risks compared to the initial deadlines if the demobilization is prolonged”.
Still, the consultants consider that the projects will follow through, anticipating an accelerated economic growth from next year, linked to the operation of the Eni-operated offshore infrastructure, which will make gas exports rise to 1,3 billion cubic meters in 2022 and 4.6 billion cubic meters in the following year.
Also read: Mozambique: Total’s project resumption to determine course for Eni, Exxon – African Energy Chamber
“Consequently, Mozambique is expected to have one of the highest growth rates in sub-Saharan Africa, with expansions of 5.2% and 7.7% in 2022 and 2023”, point out the analysts.
In commenting on the latest developments in the province of Cabo Delgado, Fitch Solutions also writes that the long-term perspective of security depends on the Government’s response.
“The rate and frequency of attacks suggests that the conflict is becoming increasingly sophisticated and is moving away from what Mozambique is capable of resolving alone”, they point out, stressing that “without regional and external security assistance, combined with long-term efforts to increase inclusive development and support for affected communities, halting radicalisation, terrorist threats are unlikely to fade in the short term”, the report concludes.