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Mozambique entice global investors with scale of LNG opportunity

Mozambique is officially positioning itself as the world’s next big global energy play. With 150 trillion cubic feet of liquefied natural gas (LNG) reserves, equivalent to 24 billion barrels of oil, the country is well placed to leverage its remarkable energy heritage to sustain broad and inclusive opportunity for generations to come.

“This is especially so as the world looks to cleaner energy sources and China steams ahead with its fuel-switching policy – aimed at replacing coal with cleaner gas as an energy source,” said Omar Mithá, chairman and executive officer, National Hydrocarbons Company of Mozambique (ENH).

Mithá is engaging with investors at this year’s Africa Oil Week in Cape Town, where he will also launch Mozambique’s national global energy trading business, ENH Trading International.

China’s Blue Sky Defence Action Plan, designed to curb air pollution, has already increased Chinese imports of LNG by 50%.

“If we get it right, Mozambique is in a position to become a long-term leading supplier of LNG to the world’s second largest economy,” noted Mithá.

According to him, Japan and South Korea are also key growth markets for Mozambique LNG exports.

In general, global demand for LNG is expected to increase by 4% per annum with the International Energy Agency (IEA) predicting that demand for gas will overtake coal in the global energy mix as early as 2030.

As such, ENH’s executive highlighted that the process of transforming Mozambique’s vast LNG resources into individual LNG and domestic gas (Domgas) projects requires immense investment.

Standard Bank, for example, estimates that Mozambique’s LNG sector presents an investment opportunity of around $128 billion between 2017 – 2025 alone.

LNG investment opportunities

A separate macroeconomic study of the Rovuma LNG project expects that Mozambique will attract between $27 and $32 billion in investment across all phases of the project.

The separate Afungi site in northern Mozambique is, on its own, expected to attract a further $55 billion, making it the world’s most expensive piece of real estate.

The Coral Floating LNG project currently under construction, with first gas expected in 2022, employs over 5,000 people in the construction of support facilities, including; materials offloading facilities, a LNG marine terminal, a new urban settlement, airstrip and highway.

“Combined, these investments are expected to position Mozambique as the world’s fourth largest producer of LNG, supplying a quarter of the world’s LNG needs and adding $15 to $18 billion to the country’s GDP each year,” according to Mithá.

In addition to wiping out Mozambique’s national debt, Standard Bank expects that LNG investment will increase Mozambique’s projected real growth rate from 4% to between 4.8% and 5.4%, adding around one third to Mozambique’s average household per capita income.

Leveraging Mozambique’s energy resources for broader economic growth and wider inclusion requires that the country develop its own global trading capabilities. To this end ENH will be announcing the formation of ENH Energy Trading at this years’ Africa Oil week.

The joint venture between ENH and established global energy trader Vitol will leverage Vitol’s global reach, network and developed trading capabilities to build ENH Energy Trading into an independent and globally recognised energy marketing organisation.

As with all ENH partnerships, “our marketing collaboration with Vitol is based upon build, operate and transfer principles, aimed at eventually equipping ENH to manage ENH Energy Trading on a stand-alone basis,” said Mitha.

Source: ESI Africa

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