MOZAMBIQUE COMING INTO ITS OWN

Mozambique is the current star in Africa’s rising inward-investment constellation.

For much of the last quarter of the 20th century, Mozambique was a war zone. Today the only war on its horizon is a bidder’s war, as investors salivate over the opportunities this Southern African country offers. Mozambique’s abundant natural resources have raised the country’s attractiveness and status as an investment destination, and as investors seek low-hanging fruit, the Southern African nation looks set for a steep increase in direct and indirect capital inflows.

Its coal, both metallurgical and thermal, mined in Tete province, is in high demand at steel and power plants in India, China and other countries. In the Rovuma Basin, Mozambique has found oil and trillions of cubic feet of natural gas. It is the largest natural gas discovery to have been made in a decade. 

Global companies and operators have poured into Mozambique. Many are deploying equipment to explore and prospect on concessions won in competitive bids. Some are building plants to commence production, while others are already in expansion phases. Still many more are joining the queue to secure a piece of the pie. With this frenzy of activity, only a few years separate Mozambique, once ravaged by civil wars, from joining the league of big earners from natural resources.

One key step to realizing that goal is the building of a liquefied natural gas facility to handle tanking and export—which is now in the development stage and involves a partnership between the government and various domestic and international firms. “An economic study, issued by Standard Bank, on the impact of an LNG facility shows that a six-train plant would add $39 billion to the local economy by 2035, with over 700,000 employment opportunities set to be directly and indirectly generated by this project,” Yvette Babb, fixed-income and currency strategist Africa, at Standard Bank, notes.

Early Movers

Foreign companies that moved in early in the oil and gas sector include Eni of Italy and Anadarko Petroleum of the US. Both are operating concessions close to each other in the prolific Rovuma Basin. Anadarko operates Offshore Area 1, estimated to hold 65 trillion cubic feet of natural gas, while Eni operates Offshore Area 4, said to hold about 75 trillion cubic feet of gas. The first LNG export from these fields, being jointly developed, is expected in 2020.

The allure of these opportunities has led to a maze of joint venture partnerships involving foreign companies and the state-run oil company, Empresa Nacional de Hidrocarburos. “The Rovuma Offshore Area 4 was concessioned to Eni with 50%, ENH with 10%, Kogas [Korea Gas] with 10%, Galp Energia with 10% and CNPC [China National Petroleum Corporation] with 20% of interest,” the National Petroleum Institute [INP], which regulates oil and gas exploration and prospecting in the country, explained in a February 2013 statement on its website. All operators in the oil and gas industry are required by law to partner with ENH.

CNPC later bought a 20% stake in Eni’s Area 4 concession for $4.2 billion. Similarly, Thai state-owned PTTEP took an 8.5% stake in Cove Energy in Offshore Area 1, operated by Anadarko, for $1.9 billion in 2012.