• 4 minutes Is $60/Bbl WTI still considered a break even for Shale Oil
  • 7 minutes Oil Price Editorial: Beware Of Saudi Oil Tanker Sabotage Stories
  • 11 minutes Mueller Report Brings Into Focus Obama's Attempted Coup Against Trump
  • 15 minutes Wonders of Shale- Gas,bringing investments and jobs to the US
  • 12 hours Evil Awakens: Fascist Symbols And Rhetoric On Rise In Italian EU Vote
  • 1 day Old - New Kim: Nuclear Negotiations With U. S. Will Never Resume Unless Washington Changes Its Position
  • 7 hours Theresa May to Step Down
  • 17 hours IMO 2020 could create fierce competition for scarce water resources
  • 1 day IMO2020 To scrub or not to scrub
  • 1 day India After Elections: Economy And Hindu Are The First Modi’s Challenges
  • 2 hours Apartheid Is Still There: Post-apartheid South Africa Is World’s Most Unequal Country
  • 2 hours IRAN makes threats, rattles sabre . . . . U.S. makes threats, rattles sabre . . . . IRAQ steps up and plays the mediator. THIS ALLOWS BOTH SIDES TO "SAVE FACE". Then serious negotiations start.
  • 2 hours Total nonsense in climate debate
  • 1 day Devastating Sanctions: Iran and Venezuela hurting
  • 1 day Level-Headed Analysis of the Future of U.S. Shale Oil Industry
  • 228 days Epic Fail as Solar Crashes and Wind Refuses to Blow
  • 1 day Compensation For A Trade War: Argentina’s Financial Crisis Creates An Opportunity For China
Alt Text

Vietnam Is On The Verge Of An Energy Crisis

As Vietnam looks down the…

Alt Text

LNG Shippers Gear Up For Hurricane Season

Hurricane season could disrupt the…

Alt Text

Qatar Doubles Down On LNG Expansion Despite Saudi Blockade

Despite Saudi Arabia’s economic blockade…

Tim Daiss

Tim Daiss

I'm an oil markets analyst, journalist and author that has been working out of the Asia-Pacific region for 12 years. I’ve covered oil, energy markets…

More Info

Trending Discussions

Can Mozambique Avoid The Natural Resource Curse?

The field of global liquefied natural gas (LNG) producers will get even more crowded going forward. U.S. oil major Exxon Mobil said Monday that it, along with project partners in Mozambique's Area 4 concession, had secured LNG off-take commitments for the Rovuma LNG project. This will lead to the all-important final investment decision (FID) in 2019, with production to begin in 2024. An FID is needed for capex intensive LNG projects before they can go forward to the funding then construction stages.

Partners in the Area 4 exploration and production concession in northern Mozambique include Mozambique Rovuma Venture, a joint venture (JV) between ExxonMobil, Italian-based energy giant Eni and Chinese state-run CNPC for a combined 70 percent share; along with Empresa Nacional de Hidrocarbonetos, South Korea's KOGAS and Portugal's Galp with a 10 percent share each, respectively.

Exxon Mobil said in a statement that LNG off-take commitments, secured from "affiliated buyer entities of the partners," are "subject to the conclusion of fully-termed agreements, which will be finalized and initialed in the next weeks, and the approval of the government of Mozambique.”

"These commitments are an important step forward for the Rovuma LNG project and provide a solid foundation for securing project financing," Massimo Mantovani, Eni's chief gas and LNG marketing and power officer added in a statement.

Swimming in gas

The Area 4 block contains deep water gas resources of 65 trillion cubic feet (tcf), and will be developed through the Coral FLNG and Area 4 onshore LNG projects. Exxon Mobil will operate the two onshore LNG projects, while Eni will continue to operate Coral LNG and upstream development. Each LNG production train will have a capacity of 7.6 million metric tons per annum (mtpa), for a total of 15.2 mtpa, making it one of the larger LNG production facilities. Related: $70 Oil Could Be Right Around The Corner

There are a number of significant developments from Exxon Mobil’s disclosure. Currently, Mozambique has its first LNG export project, a floating liquefied natural gas (FLNG) project, under construction and due to become operational by 2022, with the ExxonMobil project and another led by Texas-based oil company Anadarko planning FID’s for 2019. These two mega projects have an estimated combined cost of some $55 bn and would bring 28 mtpa of liquefaction capacity on stream by 2025, Paul Eardley-Taylor, head of oil and gas for Southern Africa at Johannesburg-based Standard Bank, said in November.

These three projects will have an estimated liquefaction capacity of 32 mtpa, placing Mozambique just behind Malaysia as one of the world’s top LNG exporters, while Qatar, Australia, the U.S. and Russia will lead the group of global LNG producers into the next decade.

Mozambique’s gas quandary

The problem, however, for Mozambique is not dissimilar from other developing countries that discovered vast oil or natural resources and quickly became rich, while not having diversified their economy enough to insulate against what is known as “the oil curse” or “resource curse.” Ironically, under such a scenario, these countries tend to experience less economic growth, less democracy, and even worse development outcomes in the long-term than those with fewer natural resources. In essence, the oil curse can best be described as the consequences of oil or resource wealth for poorly governed states.

This dynamic has played out in whole or in part in Nigeria, Angola, Myanmar, Papua New Guinea, Chad, Sudan and other countries, while Mozambique could easily join their ranks. The country has already been teetering on the brink of a major sovereign debt default, which has caused political, economic and security problems. Related: India Makes Breakthrough In Biofuel Development

Mozambique's debt quandary came about a decade after international creditors wrote off more than $6 bn worth of bad loans. Moreover, just two-and-a-half years ago the Mozambique government disclosed previously hidden government debt of another $1 bn. A DW report said in August that as Mozambique’s hidden debt scandal continues, groups are pushing for the secret loans triggered by the financial crisis, to be declared illegal. The report added that Mozambique’s economic woes were brought on by secret loans that were backed by the county's finance minister without parliamentary approval, which is required by the constitution.

Going forward

Mozambique's LNG development comes as a shift develops in global LNG markets, one that will see the current supply overhang of the super-cooled fuel pivot from a glut to one of undersupply, likely by the mid part of the next decade, if not earlier. Much of this is attributed to exorbitant LNG and gas demand growth in several regions, including the Middle East, South Asia (namely Pakistan, Bangladesh and India), EU members that are trying to diversify their gas dependency away from decades of Russian piped gas market dominance, Southeast Asia (Vietnam, the Philippines, Thailand, and Indonesia), and mostly China, whose gas demand is setting records as the country turns to gas to offset record high air pollution levels in its major urban centers. Per government mandate, at least 10 percent of China’s energy mix has to be comprised of natural gas, with further earmarks set for 2030 and beyond.

The trick for Mozambique is to both avoid the so-called resource curse as well as paying off massive debt while ensuring that gas revenue and the benefits of its gas boon can be beneficial not just to government coffers and foreign oil majors but to the country’s nearly 30 million population, most which are impoverished. If history is any indication of the future, Mozambique will have its hand’s full trying to not join the long line of countries falling victim to the ill-fated oil curse.

By Tim Daiss for Oilprice.com

More Top Reads From Oilprice.com:

Download The Free Oilprice App Today

Back to homepage

Trending Discussions

Leave a comment

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News