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Mozambique is walking an LNG tightrope

A potential economic boom for Mozambique in the form of the discovery of liquefied natural gas could be hampered by insurgency as well as fears that natural gas will be left behind by renewables

LNG could bring in $12bn a year for Mozambique


Governments in Africa have a penchant for operating in hubris. This has often led to bad decisions. In Mozambique, the discovery of liquefied natural gas (LNG) has sent the government into a frenzy owing to an anticipated gas-related economic boom.


Although production is far from guaranteed, the government has promised to utilise non-existent revenues to settle controversial debts based on future projections of a windfall. Going by central bank estimates, the country is staring at a staggering $96bn bonanza. “Mozambique has already spent some of the anticipated gas revenue windfall, at high interest, and this gas bonanza may now never happen,” says Robert Besseling, risk and intelligence firm Pangea-Risk chief executive. The effect is negotiations for more restructuring due to non-payments and increasing likelihood of sovereign default.


Tragically for Mozambique, LNG is unravelling as a concoction whose main ingredients are hope and despair. Hope in the sense that the discovery of around 150tr cubic feet (tcf) of proven natural gas reserves could propel an economic renaissance for the impoverished Southern Africa nation. Mozambique is one of the world’s poorest countries, with a gross domestic product (GDP) per capita of $500 and with about 45 percent of the country’s 30.8 million people living below the poverty line.


However, the International Monetary Fund (IMF) reckons LNG can be a game changer for the country’s economic transformation in terms of sales, taxes, royalties and dividends. At current LNG prices of $8.50 per million British thermal units, the country can generate $12bn annually by exporting 30 million tons from its three ongoing projects.

The massive revenues will not only help Mozambique tackle the debt conundrum but also bring stability in the fiscal regime and could push GDP growth to double digits. Ripple effects of the gas industry have potential to spur other sectors, effectively lifting many out of poverty.


Read more:https://www.worldfinance.com/infrastructure-investment/mozambique-is-walking-an-lng-tightrope



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