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Mozambique Strikes Gas

  • SOURCE: | qwesa2big
  • gaslandComing out of a long standing bitter civil war which lasted close to twenty-two years, Mozambique, one of the world’s poorest nations is on its way for an energy boom, according to Forbes Africa.

    The country in 2013 struck more than five to seven trillion cubic feet of gas (tcf), worth the equivalent of 700 million barrels of oil (BOE), almost two years worth of Nigeria’s oil production.  The discovery was made by Italian energy company, ENI, 80 kilometres off the shores of Mozambique six kilometres under the sea in the Agulhas; therefore making it the world’s fourth largest  gas reserve after Russia, Iran and Qatar.

    This discovery in my view is significant especially coming at the time when the country faces tough economic challenges  Mozambique’s hoes will enrich an economy rated by the UN as the fourth poorest in the world, with most of its 23 million people living on less than a dollar a day.

    Again, the country may have to grapple with many obstacles to the vast and unimagined wealth lying under the sea. Poor infrastructure and skills gap, corruption among others. The most promising discovery is in the massive Rovuma Basin, which is 30,000 square kilometres, about the same size as Lesotho.

    Since 2010, there have been 10 offshore discoveries in the basin promising 190 trillion cubic feet of natural gas. This may push prices high by 2020, due to the supply demand gap for natural gas.

    Investors have sunk about $1 billion into extracting Mozambique’s gas with very little to show for it, and it may perhaps take many more billions more in foreign investment.  Interested investors are studying exploration data waiting for the fifth round of licensing bids, expected this year, most of which will be for the Rovuma Basin.

    Mozambique has studied how African nations have by-passed by their resources booms and is tightening legislation.  However, there is fear in Maputo that most of the revenue will flow overseas, the equipment will be bought in from elsewhere, as will highly paid expatriates , leaving the people of Mozambique as bystanders in a land where the government owns all the mineral rights.

    These priorities will be laid out in the amendments to the Petroleum Bill, on its final passage through parliament which will lay down new rules for foreign investors.  The bill is expected to be published in the next few months ahead of elections in October. The plan is to maximize revenue for Mozambique and provide certainty and clarity for investors, without ruining competitiveness.

    Under the bill, crude oil will be subject to 10% production tax, and for natural gas, 6%.  It stipulates that 5% to 20% of the capital of foreign companies be placed on the Mozambique Stock Exchange within five years, for sale to locals.  The bill also says foreign companies, operators and subcontractors alike, must train workers from Mozambique, 5% for big companies and 8% for medium-sized companies and 10% for small companies.

    Mozambique, rated as the fourth poorest nation on earth has a long way to go before it can become a player in the world energy market.

    As Africa is rising rapidly, I hope Mozambique will rise with it steadily to realise its full potential and shared growth for proper development.

    Source: Malise Otoo/

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