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Investors Flock To The Next Big LNG Hot Spot


On June 1, 2017, Italian oil major Eni officially signed off on its Coral South Liquefied Natural Gas (FLNG) project in Mozambique, almost 6 years after the initial discovery of extensive gas reserves positioned Mozambique as potentially one of the world’s leading natural gas producers.

Not only is the Coral South FLNG project expected to significantly contribute to Mozambique’s economic development, but it’s also proof that there are investors that still have confidence in a country that is struggling through an ongoing financial crisis.

Not only have Eni’s discoveries drastically improved Mozambique’s long-term economic outlook, they may also have proved to be a turning point in bilateral relations, as both countries appear keen to capitalize on these lucrative deposits.

Historical Grounding

Mozambique is one of Italy’s leading partners in Sub-Saharan Africa, in historical, political and economic relations. Although Mozambique was previously a Portuguese colony, Italy has played a significant part in its post-colonial history—particularly in terms of the role the Italian government and Catholic Church played in negotiating the Rome General Peace Accords in 1992.

Since then, Italy has remained a key partner, providing notable financial support to Mozambique’s education, health and development sectors.

More recently, relations have shifted from a predominantly donor-beneficiary relationship to a more articulated and equal political and economic cooperation.

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Furthermore, Eni’s multiple gas discoveries since 2011 has strengthened this relationship. Notably in July 2014, the importance of Eni’s gas operations prompted then-Prime Minister Matteo Renzi to become the first Italian head of government to visit Mozambique since its independence from Portugal in 1975.

Enter Eni – a Power Player with Continental Aspirations

Eni has been present in Mozambique since 2006, and has made several significant gas discoveries. This includes their October 2011 natural gas discovery, often referred to as the largest in the company’s history.

Notably, while Eni is no longer majority owned by the state (the Italian government maintains a 30 percent stake after having initiated a privatisation process in 1995), Eni remains a considerable Italian foreign policy tool. Nicknamed “Italy’s other foreign affairs ministry”, former Prime Minister Renzi has referred to the company as “a fundamental piece of [Italy’s] energy policy, [Italy’s] foreign policy and [Italy’s] intelligence policy”.

Furthermore, Eni’s CEO Claudio Descalzi is widely regarded as having the same powers as a government minister, and he is believed to know the leaders of many countries better than Italy’s official ministers.

For many countries in Africa—particularly Mozambique—Descalzi’s 2014 promotion to CEO may have come as a welcome development. Having spent much of his early career in Africa (including Libya, Nigeria and Congo), after taking over as head of exploration and production in 2008, Descalzi is believed to have been instrumental in helping Eni expand its operations across the continent. This is particularly the case in sub-Saharan areas, which has catapulted Eni into the biggest foreign oil and gas operator on the continent.

More importantly, it was during Descalzi’s tenure as head of exploration and production that Eni made its game-changing discoveries in Mozambique. Therefore, the country’s operations are likely to not only remain important to Eni in terms of business, but also to Descalzi personally.

Africa currently provides over half of Eni’s total production of oil and natural gas. In 2016, Descalzi announced that the company planned to invest some €20 billion in Africa before 2020. This reportedly amounts to approximately 60 percent of Eni’s total global investments.

Descalzi has said that over the long term, Eni will focus on increasing its investments in developing Africa’s gas reserves—including the two major fields the company recently discovered in Mozambique and Egypt—with the aim to devote more money to power generation and renewables in the longer term.

Notably, Descalzi has described Eni’s Coral South FLNG project, as “just an appetizer” to what will follow regarding Eni’s operations in Mozambique’s Rovuma Basin, strongly inferring that Eni’s presence in Mozambique will only keep growing in the coming decades.

Eni – a Gatekeeper to the Wider Mozambique Market

As Eni continues to expand its Mozambique operations, the investment market for other Italian companies will become increasingly open.

So it’s likely no coincidence that just over a month after Coral South FLNG Project was signed, a large business delegation from Mozambique attended a series of conferences and meetings in Italy in July 2017, aimed at encouraging Italian investments.

Álvaro Massingue, Vice President of the Confederation of Economic Associations of Mozambique (CTA) says that the trip was organised to strengthen economic partnership, and to highlight potential business opportunities for Italian companies looking to enter Mozambique, and potentially share their technical expertise.

This is important because if Mozambique is to truly exploit its natural resource discoveries, it will require a qualified workforce. Without a significant history of an oil and gas industry, Mozambique’s workforce doesn’t generally possess the necessary skills. In some ways, this problem has been acknowledged and is being addressed.

For example, in May 2014, Mozambique’s National Hydrocarbon Company (ENH) announced that its subsidiary ENH Logistics (ENHL) established a partnership with Italian company Bonatti. The focus of the partnership was to provide services in the areas of procurement, construction, the operation and maintenance of infrastructures, electricity and automation. ENHL Bonatti will also aim to explore other business opportunities that may arise from growing investments by multinational companies in Mozambique’s nascent energy sector. ENH CEO Eduardo Naiene hopes that Bonatti’s experience will benefit ENHL by bringing greater quality to the services in ENHL’s core business, including engineering, construction and management of remote fields.

The Italian government appears to have increased its efforts to entice Italian companies to invest in the country. As well as highlighting the attractions in investing in Mozambique’s substantial natural resources—including coal, natural gas and precious stones—the Italian Ministry of Foreign Affairs is encouraging investment in the country’s power, infrastructure, agriculture and tourism sectors.

To date, there are about 40 Italian companies active in Mozambique, mainly in the hydrocarbons, construction, tourism, logistics and transport and consumer goods industries, with investments totaling about €130 million. The Italian government continues to treat Mozambique as an investment destination with further potential—often referred to as a growing economy, and a market that offers opportunities in diverse sectors, including agriculture, aquaculture, manufacturing, renewables and financial services.

In July 2015, Mozambique and Italy established the Chamber of Commerce Mozambique-Italy (CCMI), which aims to support the Mozambican economy through private sector investments.

At present, Mozambique’s main investment sector is energy, closely followed by infrastructure and construction, and logistics and transport. However, in the longer term, with the consolidation of Mozambique’s reputation as a regional energy, hub demand for other industries will increase, including agri-business, tourism, furniture, fashion and design.

Unindustria, an Italian provincial association of manufacturers and enterprises, claims that Mozambique is currently one of the most attractive countries in Africa for small- and medium-sized enterprises (SMEs). The association’s Vice President believes that the country’s large natural gas reserves and mining resources will increasingly attract foreign investment, which in turn will create attractive opportunities for SMEs throughout all sectors, not just the extractives.


Should Mozambique meet its potential and continue to attract Italian investment, it’s conceivable that an increasing number of Italian nationals will relocate to Mozambique, both temporarily and permanently. A growing Italian diaspora would also serve to create opportunities in other sectors, and result in the potential establishment of Italian schools, shops and restaurants.

Related: Supermajors Prepare For A Permian Bidding War

Notably, the Italian Ministry of Foreign Affairs believes that Mozambique’s food industry remains an attractive business prospect. Currently the majority of food products are imported from neighbouring countries. However, with an increase in the number of foreigners, and an expected general increase in the standard of living, there are significant opportunities for the marketing of Italian food products.

What Lies Ahead

Due to Eni’s influential position in Italy’s political and business sphere, relations between Mozambique and Italy will only grow closer in the coming years. Both countries appear to be emphasising the benefits of increasing private sector cooperation and investment.

Italy’s increasing interest in Mozambique will also come as a relief for the Mozambican government, particularly as it struggles to recover from a high-profile debt scandal that emerged in 2016.

Furthermore, the fact that the Coral South FLNG project has attracted financing from 15 banks—despite its inherent technical and political risks—has demonstrated that, despite the country’s ongoing economic and financial issues, there is still belief in Mozambique’s investment climate.

Despite efforts to increase investment in Mozambique, significant challenges remain, including the presence of widespread corruption, poor infrastructure, a shortage of skilled workers, and, above all, a pervasive influence of the political elite.

Ultimately, whether these legacy issues will persist or be eroded depends on how Italian interests leverage opportunities in Mozambique. Will they feed to underlying problems or demand transparency?

By Shadow Governance Intel

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