A Review of the Nigerian Energy Industry

Mozambique: LNG payments to state could reach $212bn

*Offshore platform in Palma, northern province of Cabo Delgado.
*Offshore platform in Palma, northern province of Cabo Delgado.

31 October 2015, Maputo — The Mozambican state could gain as much as $212 billion US dollars in taxes, dividends, bonuses and other payments over the lifetime of the liquefied natural gas (LNG) project in Palma, in the northern province of Cabo Delgado, according to the chairperson of the National Hydrocarbon Company (ENH), Omar Mitha.

Speaking at a conference in Maputo on Wednesday on the gains for the State from the exploitation of hydrocarbons, organized by the anti-corruption NGO, the Centre for Public Integrity (CIP), Mitha pointed out that the gains from the LNG project will depend on how many LNG factories (known as “trains”) are built.

Consortia headed by the United States company Anadarko and by the Italian energy firm ENI have so far discovered gas reserves estimated at 170 trillion cubic feet in Rovuma Basin offshore areas one and four. Anadarko plans to build its liquefaction plants on land, on the Afungi Peninsula in Palma district, while ENI intends to build a floating LNG facility.

Mitha’s calculations are that, if only two LNG trains are built, payments to the state will amount to 67 billion dollars in the project’s lifetime (up to 2035). But if six trains are built, then payments will rise to 212 billion dollars.

With six trains, Mitha put the increase in Mozambican GDP by 2035 at 39 billion dollars. Per capita GDP, he added, would rise from the 2014 figure of 650 dollars to 4,500 dollars in 2035, in real terms.

From now until 2035, the project could generate 700,000 jobs (assuming six trains and no construction delays). But only 16,000 of these will be jobs in the LNG industry, mostly building jobs at the peak of constructing the trains. The rest will be indirect jobs, generated in the rest of the economy.

Mitha stressed that these figures are only projections, and so may have to be adjusted. Clearly much will depend on the international price of natural gas, which has been falling in recent months. If the gas price increases then so will the gains of the Mozambican state. Further drilling may lead to further discoveries and so increase the known reserves in the Rovuma Basin. This could lead to the building of more trains, or an increase in the life span of the project.

One problem for ENH is that it is expected to contribute to the investment that will be made over the coming years by the Anadarko and ENI-led consortia. ENH holds a 15 per cent share in Area One and 10 per cent in Area Four. Currently ENH does not have the liquidity to pay for uts share in these investments, and Mitha said that it is a key challenge to find ways of financing ENH so that it can participate.

Mitha did not want to see all the gas exported.

Instead, the huge reserves in the Rovuma Basin, should lead to massive use of natural gas inside Mozambique and in the southern African region.

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