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Zainab Calcuttawala

Zainab Calcuttawala

Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on…

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ExxonMobil Investment Could Bring Mozambique Bank From Near-Default

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A new investment by ExxonMobil in Mozambique could potentially help the African country battle a deepening debt crisis, according to two people “with knowledge of the matter” who were cited by World Oil.

The discoveries, made by Anadarko Petroleum Corp. and Eni SpA, could generate up to $1.3 billion in revenues for the government, one of the anonymous sources said.

Exxon has also demonstrated interest in Area 4 - an area currently being exploited by Eni. China bought out 20 percent of Area 4 from the Italian firm three years ago.

Mozambique has been grappling with its debt crisis after $1.4 billion in hidden loans and notes became public in April, prompting the World Bank and other aid institutions to stop their donations to the impoverished country.

“We don’t comment on rumors or speculation,” Lauren Kerr, a spokeswoman for Exxon, told World Oil in an email after the publication asked for a comment. Anadarko and Eni also declined to comment.

Vast gas discoveries have the potential to triple Mozambique’s growth over the next five years, but short term debt has paralyzed political and economic systems.

Related: Brexit Puts North Sea Oil In Limbo

The state-owned Mozambique Asset Management is set to default on $535 million in loans, which it took out to construct shipyards to service natural gas drilling off of its coast.

Because of the grace period included in the loan terms, Mozambique is not yet technically in default, but it could default soon if it fails to convince creditors to make a deal. Mozambique had tried to renegotiate with creditors, led by Russia’s VTB Bank, but has been unable gain some leniency.

The ballooning debt is connected to the hype surrounding Mozambique’s large natural gas reserves that sit just offshore. Estimates vary, but there could be 100 to 180 trillion cubic feet of natural gas, which puts it just behind the continent’s two largest holders of natural gas reserves, Nigeria and Algeria.

By Zainab Calcuttawala for Oilprice.com

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