Breaking News: Prospect of earnings from natural gas “a serious matter” for Mozambique – Omar Mithá

Nelson Ocuane _Omar Mithá

(2015-10-29) The president of the National Hydrocarbon Company (ENH) said on Wednesday that the prospect of earnings from natural gas in northern Mozambique “is a serious matter”, and should translate into strong economic growth and revenues for the state.

Speaking at a conference on the state gains from hydrocarbon exploration, organized by the Centre for Public Integrity (CIP) in Maputo, Omar Mitha, chairman of the state oil company ENH’s board of directors said “This project will be the largest in sub-Saharan Africa in terms of project finance”.

Oil multinationals operating in Mozambique have discovered natural gas reserves in the Rovuma Basin, Cabo Delgado province, estimated at about 200 trillion cubic feet, and it is expected that US$31 billion (EUR 27.7 billion) will be invested in the exploitation of this resource in the coming years.

According to Mitha, when natural gas projects are in full operation, the gross domestic product (GDP) of Mozambique could rise from the current US$16 billion (EUR 14 billion) to US$39 billion (EUR 35 billion) by 2035, in addition to potentiating infrastructure building and the creation of a suggested 700 000 new jobs.

ENH also predicts that the state will collect more than US$67 billion (EUR 60 billion) in revenues from the exploitation of natural gas in Rovuma, assuming that the price of gas increases during the project‘s development process.

Meanwhile, the ENH chairman cautioned against the vulnerability of Mozambique to instability in international markets and low raw material prices, leading to multinational leaders in natural gas exploration in the Rovuma Basin, ENI and Anadarko, not having taken final investment decisions yet.

“You have to realize that we are vulnerable to instability in international market and this vulnerability does not dissipate by the mere diversification [of the economy],” said Mitha, highlighting the need for the country to guarantee financing.

Data presented yesterday indicates that about US$7 billion (EUR 6 billion) was spent on exploration in the Rovuma Basin, with results likely to project Mozambique among the largest natural gas producers in the world.

Adriano Nuvunga, president of CIP, a civil society organization dedicated to transparency in state dealings, warned of the risk of failing to manage expectations, adding that, despite the forecast of an increase in current GDP per capita of US$650 (EUR 586) to US$4,000 (EURO 3,600) in 2035, the millions in gas revenues may fail to reach average Mozambicans.

“The expectations that people have are huge. The population is hungry and look at the Rovuma basin as the project that will transform not only their lives but the structure of the country,” he said.

The president of CIP also recalled that both multinationals and public authorities will need large amounts of funding and that this will in turn necessarily affect revenue.

In addition to the Rovuma gas reserves, Mozambique also has deposits already being explored by South African Sasol in Pande and Temane, in Inhambane province, southern Mozambique.

In 2013, a CIP report said that the price the South African multinational pays for gas extracted in Mozambique is “abusive,” adding that it will take “forever” until the state is able to tax its profits, adding that the contract signed between the Mozambican government and the company amounted to “squandering” state resources.

“The situation continues. There has been a price rise this year, but the decline in oil prices in the international market has eroded the benefit,” Adriano Nuvunga said yesterday, reiterating the need to review certain contractual clauses to the benefit of the Mozambican side.

Source: Lusa

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