Business
Mozambique to use gas revenues to industrialize and social development
(Reuters) – Mozambique plans to take advantage of massive gas reserves to develop domestic industries as well as export liquefied natural gas, boosting government revenue by US$6 – US$8 billion a year, the latest draft of its master plan showed.
Some 150 trillion cubic feet of gas have been found off its shores so far, and the government and companies scouting wells have estimated there may be potential to double that estimate.
Oil majors including Italy’s Eni and the U.S.’s Anadarko Petroleum are pushing for the development of Liquefied natural gas (LNG) plants first as the quickest way to pay off investments in gas production.
But while exports will be prioritized and production deals are expected to be signed next year, the government hopes other downstream developments will come soon after.
“We want more than just LNG. We have huge reserves and we want to see how we can use the gas in the local, regional and international market,” Minerals Minister Esperanca Bias said.
Mozambique hopes the gas will become a game-changer for a country where more than half live below the national poverty line.
A net importer of fuel, Mozambique hopes to use gas to manufacture liquid fuels. It also aims to produce cheap electricity to help supply a large number of its citizens who still have no access to power.
The US$6 billion to US$8 billion estimate compares with a World Bank figure of US$12.8 billion for gross domestic product in 2011.
Companies from South Africa, Germany, Japan, India and South Korea among others have expressed interest in setting up gas-to-liquids, methanol or fertilizer plants or in processing gas for power generation or production of steel and aluminium.
If all the projects were realized, they would require 2.4 billion cubic feet of gas per day or capacity equal to three LNG trains – facilities that turn natural gas into liquid – the draft plan showed.
“That’s a significant amount and really raises the question of how the government will balance an export-focused development approach with the domestic off-take,” said Anne Fruhauf, director for Africa energy at consulting firm Horizon Client Access.
Sovereign Wealth Fund
The plan estimated there was enough gas in Ruvuma to feed 10 LNG trains and other major gas-based projects starting in 2018.
In addition, the area around Mozambique’s Moatize basin in the north-central Tete province may contain significant resources of coal bed methane, which is gas trapped in underground coal seams.
Anadarko said it would be interested in selling gas into the domestic market after it matures to a point that gas prices are competitive, while Eni mentioned plans to build a power plant in Mozambique.
For now, local development plans are vague and depend on investors’ access to capital, future gas prices and development of domestic transportation and distribution infrastructure.
The plan analysed four coastal locations for the development of a gas hub: one in Palma, close to Tanzania’s border and near the discoveries made by Anadarko and Eni, and three others in Pemba, Nacala or Beira further south.
While the LNG plants are likely to be built at Palma, the state is keen to distribute the benefits of the gas riches to other parts of the country and build industrial hubs based on gas.
One major challenge will be transporting the gas from the far north over its 2,500 km (1,550 miles) coastline – Africa’s longest – to the capital Maputo in the far south.
Mozambique is now finalizing the master plan, which will feed into a more concrete document that will rank individual projects according to their feasibility and economic boost.
Each location and individual project will be evaluated based on its economic viability, contribution to jobs, other social development, state revenues and on environmental grounds, a senior government official said.
Mozambique plans to create a sovereign wealth fund or a national development bank to channel future gas revenues into industrial and social development.