LNG sets Mozambique on new growth trajectory

The change in China’s energy policy affords Mozambique the opportunity to cement itself in the global gas market.

Picture: eni.com

Mozambique stands of the cusp of an economic revival with a US$10 billion investment in Mozambique’s Coral Floating Liquefied Natural Gas (FLNG) project set to turn it into the most expensive piece of real estate in the world.

This was the word from Paul Eardley-Taylor, Standard Bank’s head of oil & gas, Southern Africa, when speaking at the Big 5 Board Awards that convenes Africa’s leading oil and gas companies.

Essential to the FLNG development is embracing the Blue Sky Defence Action Plan by Chinese President Xi Jinping.

Among the measures advocated to curb air pollution by 2020 are the switch from coal to gas. This has increased Chinese demand for liquefied natural gas (LNG) by 40%, with LNG imports increasing by 50% year-on-year.

Demand for LNG is expected to increase by four percent 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.

This change in China’s energy policy affords Mozambique the opportunity to cement itself in the global gas market and move to fourth or fifth place as a supplier of LNG, effectively making Mozambique the supplier of 25% of the world’s LNG.

A fifth round of licensing has taken place, with another round expected to occur in 2019.

Other gas projects in the pipeline are Golfinho, with a final investment decision (FID) expected in the second quarter of 2019, while the FID for Rovuma is expected in the third quarter of 2019 and it set to be fully commissioned by 2025.

Once the Coral deal has closed, LNG FID will completely change the face of Mozambique.

Eardley-Taylor envisages that the level of FID will reach US$128 billion by 2025. With a GDP of just US$14 billion and a debt-to-GDP ratio of almost 90%, this will be a massive shot in the arm to a struggling economy.

Standard Bank and its 20% shareholder, the Industrial and Commercial Bank of China (ICBC), are collectively the largest lenders to the project - reflecting the power of their partnership in driving African growth.

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