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23 April 2019
Africa’s New Electoral Playbook

Africa’s New Electoral Playbook

Africa Current Issues Vol. 2019-02

23 April 2019
Africa Digest, Volume 2019-01

Africa Digest, Volume 2019-01

Bi-weekly summary report on the trends and issues in the macro-environment and industry to promote knowledge and raise understanding of business in Africa.

23 April 2019
African SEZs & GVCs in the age of automation

African SEZs & GVCs in the age of automation

Is the African dream of industrialisation via special economic zones (SEZs) hosting global value chains (GVCs) feasible? 

23 April 2019
Nigeria's business prospects, investment opportunities to grow in government's 2nd term

Nigeria's business prospects, investment opportunities to grow in government's 2nd term

Nigeria's President Muhammadu Buhari successfully secured a second term at the helm of Africa's largest economy. Despite the controversial circumstances surrounding the run-up to the February poll, this was a...

23 April 2019
Is Africa the next tourism growth frontier?

Is Africa the next tourism growth frontier?

Summary report of a panel discussion at the Africa CEO Forum, held in Kigali, Rwanda, on 25 and 26 March 2019.

12 April 2019
The Opportunity in Banking Consolidation in East Africa

The Opportunity in Banking Consolidation in East Africa

  The East African banking sector has made significant strides in the past several years. From an industry that was once blamed for its exclusion to now being praised for its...

22 March 2019
Belvie: Establishing a consumer goods business in West Africa

Belvie: Establishing a consumer goods business in West Africa

  BeIvie is a Niger-based non-alcoholic beverages manufacturing and bottling group founded in 2014. This case study looks at how, in a relatively short period, Belvie captured significant market share from...

22 March 2019
Trends and Events in Africa 2018

Trends and Events in Africa 2018

2018 has been an interesting year for Africa, with various events and trends becoming visible. 2016 saw the effects of the slowdown of China’s economic growth due to its rebalancing...

20 March 2019
Nigeria’s Opportunity to Enhance the CFTA

Nigeria’s Opportunity to Enhance the CFTA

  Synopsis: The Continental Free Trade Area negotiations should take the concerns of domestic stakeholders seriously, for its own sustainable development.

19 March 2019
Raising The Steaks: Africa’s booming meat industry

Raising The Steaks: Africa’s booming meat industry

  The rapid growth of meat consumption in Africa will provide attractive opportunities for investors, but making production more efficient, protecting the environment and improving the lot of smallholders, pose many...

05 October 2018
Cover story: Sudan: Lifeline for the banking sector

Cover story: Sudan: Lifeline for the banking sector

  Sudan, one of the largest countries in the heart of Africa, has been struggling to stay afloat economically since the US imposed crippling trade and investment sanctions in 1997. The...

04 October 2018
Involving youth in agriculture in Africa

Involving youth in agriculture in Africa

Africa’s youth bulge presents both an opportunity and a challenge. More must be done to involve youth in agriculture as a means of providing employment, say Johan Burger and MD...

27 September 2018
More Singapore firms venturing into “challenging” Africa

More Singapore firms venturing into “challenging” Africa

It is a “long-term” play, say experts, but there is potential in areas like services, infrastructure

27 September 2018
Manufacturing in Nigeria: Status, challenges and opportunities

Manufacturing in Nigeria: Status, challenges and opportunities

  According to the National Bureau of Statistics (NBS), the Nigerian manufacturing sector is dominated by the production of food, beverages and tobacco, with sugar and bread products generating the greatest...

24 September 2018
Africa Rising will Lift Singapore Boats Too

Africa Rising will Lift Singapore Boats Too

If there is one thing that the recent Africa Singapore Business Forum (ASBF) reminded me of, it is what a polarising prospect the continent remains.

07 September 2018
Unpacking South Korea’s engagement with Africa

Unpacking South Korea’s engagement with Africa

  Following the end of the Korean War in 1953, South Korea prioritised its alliance with the United States in pursuit of economic growth and military security. It took more than...

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The sixteen years of civil war post-independence left various scars. However, improvements in the poverty level of the population have been observed over the past 25 years. Mozambique has nearly halved the share of its population consuming below a basic needs poverty line. Although the country remains poor, with 49.2% of the population living in poverty, Mozambique is now approaching the living standard levels of other low-income African countries, like Tanzania.

The discovery of immense natural gas reserves one decade ago creates hope that the economic situation and, consequently, living standards of the population, will improve dramatically. With proven reserves of 100 trillion cubic feet, Mozambique ranks 12th among the countries with the largest natural gas proven reserves, according to the US Energy Information Administration EIA (Figure 1). Mozambique’s economy is ticking on the royalties and the range of direct and indirect businesses and jobs expected to be created once these reserves start producing.

 

Figure 1 – Top 20 countries by proven reserves of natural gas, 2017

Most of the natural gas discoveries were found in the Rovuma Basin, offshore Cabo Delgado state, northeast of Mozambique, during five years of exploration and appraisal activities. The Rovuma Basin is located close to the border between Tanzania and Mozambique, at the Rovuma Delta (Figure 2). The offshore regions that are receiving most of the attention and where plans for development are ongoing, are Areas 1 and 4, controlled respectively by oil and gas giants Anadarko and Eni (Figure 3).

Area 1 hosts the Prosperidade and Golfinho/Atum complexes, which further host several deep-water discoveries, including Windjammer, Barquentine, Lagosta, Camarao, Golfinho, Orca, and Atum, at an average water depth of 1,600m. Area 4 is where the coral field is located, at water depths ranging between 1,500m and 2,300m, and situated 241.4km northeast of Pemba, capital of Cabo Delgado province.


Figure 2 – Natural gas reserves in Mozambique


In December 2012, Anadarko reached a joint agreement with Eni to establish the foundational principles for the coordinated development of the common natural gas reservoirs spanning both offshore Areas 1 and 4. Additionally, multiple front-end engineering and design (FEED) contracts were awarded for both onshore liquefied natural gas (LNG) construction and offshore installation.


Figure 3 – The most prosperous offshore natural gas reserves are located in Areas 1 and 4

A total of 60 production wells are proposed to be drilled at offshore Areas 1 and 4 during the initial phases, which can increase to 120 wells in subsequent stages of the project. The wells will be drilled using drill ships.

The output from the gas fields in Area 1 will be conveyed to the onshore LNG plant to be built on the Afungi peninsula in Cabo Delgado province. The natural gas will be transported from the offshore platform to the onshore processing facility through a 45km-long subsea pipeline. Once the gas reaches the LNG plant, it is cooled down to -162oC (-260oF) and transformed into liquid in order to be exported to other countries through cryogenic vessel tanks or liquefied natural gas (LNG) tankers.

The project aims at initially supplying approximately 100 million cubic feet of natural gas a day (MMcfd) to the onshore LNG facility, which will primarily be equipped with two LNG trains with processing capacity of six million tonnes per year (mtpa) each. It will also include two 180,000m³ LNG storage tanks, condensate storage facilities, a multi-berth marine jetty, and ancillary utilities and infrastructure. The LNG processing plant gets the name “LNG train” due to its several parallel units arranged in a sequential manner.

Other onshore infrastructure will include an airfield, power generation facilities (gas turbines), waste disposal facilities and water and wastewater treatment facilities.

Area 4, which lies too far from the coast to economically send gas ashore through pipelines, will have a floating LNG (FLNG) plant with a capacity of 3.4 million tonnes of LNG per year (mtpa). An FLNG has equivalent processing capabilities as onshore LNG facilities. The difference is that the former is built on top of an offshore platform. The construction of this platform will take place in South Korea.

The Coral South FLNG project in Area 4 received a final investment decision (FID) in June 2017, with an investment of US$8bn. Around 60% of the cost of the FLNG facility will come from project finance, the first instance of such an arrangement for a liquefaction floater, according to Eni. Fifteen international banks have subscribed, backed by five export credit agencies. South African lender Standard Bank and its 20% shareholder, the Industrial and Commercial Bank of China (ICBC), say they are the largest lenders in Eni’s Coral South FLNG.

The development of the onshore infrastructure will generate a large number of jobs for the local people, both directly and through supporting businesses that will inevitably blossom as a result of the additional people moving to the region and the economic upliftment brought about by the natural gas sales. Megaprojects such as this create an unmatched opportunity for the local population to develop technical and vocational skills, boosting the country to become competitive in the global arena.

A macroeconomic study conducted by Standard Bank in 2014 examined the impact of the development of the Area 1 project with six LNG trains on the Mozambican economy. The study found that, if the first gas indeed starts being produced by 2022, Mozambique has the potential to add 600,000 jobs to its economy by 2035 (Figure 4). This number can go even higher when considering the employment opportunities that will be created by Coral South (Area 4), which has already received the go-ahead from all parties involved.


Figure 4 – Employment created is Area 1 starts producing gas by 2022

The study also points out that over 70% of the jobs that will be created by the Mozambique LNG projects will be of an un-skilled or semi-skilled nature. The migration of skilled labour to the region will create prospects for skills transfer to occur among local workers, thus increasing the competency of the local labour force.

The impact of natural gas exploration in Mozambique will also significantly affect the country’s GDP. The economic contribution due to the development of just the Area 1 project is expected to account for 56% of Mozambique’s GDP by 2035 (Figure 5). Consequently, the GDP per capita of the population will also dramatically grow. Although GDP per capita can be distorted by high inequality in societies, it remains a sound indicator of the average income per person in an economy. Mozambique’s real GDP per capita in 2016 was $382. With the fruits of the development of Area 1, GDP per capita income is expected to grow eleven-fold, reaching $4,450 by 2035.


Figure 5 – Mozambique’s GDP forecast and gains from natural gas exploitation

Another channel through which the Mozambican economy will benefit from the investments in natural gas exploration, is additional tax revenue – both income tax, from the new jobs created, and corporate tax, from Anadarko’s and Eni’s operations. Furthermore, the likely increase in household consumption expenditure due to greater household income, implies additional revenue from indirect taxes, including value-added tax (VAT).

Mozambique occupies a privileged geographic location relative to the trading routes for LNG, being able to reach customers in Asia-Pacific markets and to tap into the growing demand for energy in India and China. However, to really enjoy the spoils LNG sales will generate and to transform the quality of life of its population, Mozambique will need to work on improving its institutions, curbing corruption and enforcing the rule of law, besides building infrastructure that currently is either inefficient or non-existent. Today, the country ranks at 138th in ease of doing business, out of 190 countries, and scores at 153th out of 180 countries in the Corruption Perception Index. There is, therefore, a lot of work to be done and a lot to improve.

The article was first published in How We Made It In Africa on 24 May 2018. Republished with permission.

The author, Otavio Veras, is a research associate of the NTU-SBF Centre for African Studies, a trilateral platform for government, business and academia to promote knowledge and expertise on Africa, established by Nanyang Technological University and the Singapore Business Federation. Otavio can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

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