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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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Is This Country Africa’s Qatar Of Natural Gas?

Mozambique had decided that its massive natural gas reserves would be the country’s ticket off of the world’s poorest countries shortlist – but mismanagement of domestic strife and wonky fiscal planning have put Maputo behind in becoming Africa’s Qatar.

Texas-based Anadarko and Italian Eni struck natural gas in the Rovuma basin in 2010. The two companies selected Palma, a small fishing village near the center of the underwater and aboveground basin, to host facilities that will support the extraction of natural gas from a site 30 miles offshore.

It’s one of the largest projects attempted by a multinational oil company anywhere so far, according to The Wall Street Journal, and includes the construction of air-conditioned housing and a new airport and seaport for the village’s 3,000 residents, most of whom currently reside in mud huts.

"Oil is probably easier," concedes Don MacLiver, the former Anadarko exec leading the Mozambique project. But nowadays, he says, the opportunities available often include "large gas discoveries in remote locations."

This is because natural gas discoveries have outsized oil discoveries 2-to-1 over the past two decades, with major finds located far from power grids that can drink up the fuel without much hassle. Liquefied natural gas condenses the gas into liquid form, making its transport via ships, pipelines, and trucks manageable and profitable. Still, margins from the country’s coming oil sector will be higher.

South Africa-based chemicals and energy company Sasol plans to begin producing oil in Mozambique within three years, which would mark the nation’s first oil output, Sasol joint chief executive Stephen Cornell told Reuters in an interview in February. Related: Russian Producers Fall Behind As Big Oil Booms

We have drilled four wells, two of them gas, two of them oil, all showing positive results. In one of the areas where we expected mostly gas we found gas and oil,” the manager noted, adding that Sasol had sent a “notice of discovery” to the Mozambique government.

None of the 180 trillion cubic feet (five trillion cubic meters) of natural gas in the Rovuma basin is any closer to being extracted and transported to work markets years after the beginning of the project’s construction. Initially, blueprints claimed that Mozambique would see its first LNG in 2016, but the date has been delayed to 2023 due to a $2 billion debt scandal and unforeseen militaristic complications.

The International Monetary Fund and the World Bank cancelled their financial support of Mozambique last year, when new reports called the government out on three secret loans totaling $2 billion to continue the financial support of the coastal LNG project.

Maputo expected to have the funds to pay back the loans ready by 2016, a scenario that would have been true had the Palma project been ready in time. Lenders got impatient when the new timeline came out, spurning leaks of the clandestine loans to the press.

State-run Empresa Nacional de Hidrocarbonetos (ENH) owns a minority stake in the venture, and many fear that without backing from the WB and the IMF, the company will not be able to honor the terms of the contract.

Other multinationals seem keen on becoming a part of the project. Exxon purchased a 25 percent stake of Eni’s share in the project for $28 billion in March. Anadarko upped its own investment by $770 million as well that same month because the company had “made good progress on the legal and contractual framework.”

The ruling Frelimo party and Renamo rebel fighters reached a truce in December, halting three years of domestic battles that interfered with railroad vital to shipping supplies around the nation and exporting goods to neighboring countries.

“It’s been really a pretty serious disaster that impacted right throughout the economy,” said Peter Fabricius, of South Africa’s Institute of Security Studies. “What it does indicate is serious deficiency in governance and that is at the heart of any discussion about whether resources are going to become a blessing or a curse.”

The end of hostilities between the ruling and rebel parties opens a window for the revitalization of Mozambique’s economy, now steeped in recession. But the absence of the IMF and the WB in propping up one of the world’s poorest governments makes it difficult to envision the start of a new phase in the country’s politics absent an angel geopolitical investor: perhaps a regional investment bank or a wealthy and natural gas-thirsty nation.

By Zainab Calcuttawala for Oilprice.com

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