Mozambique 1 March: A $6 billion pipe dream (or nightmare)
Good afternoon. Alarm bells are ringing at Zitamar News following today’s announcement regarding the development of $6 billion gas pipeline project running from the Rovuma Basin to South Africa, backed by anonymous Mozambican investors. The project will be developed by a Chinese state-owned firm and financed with more than $4 billion in new Chinese lending.
SEE: China to lead development of $6bn Mozambique gas pipeline
From where we sit, the whole deal suffers from a serious lack of transparency – from project promoter Sacoil’s MoU with South African and Mozambican government agencies back in March 2014, through to the engagement of China’s CPP without a tendering process to build a project which experts think is of dubious economic merit.
Perhaps the most alarming element though is the involvement of Profin Consulting, a Mozambican company of unknown ownership and credentials set up in July 2015 with the aim of profiting from Mozambique’s coming energy boom. In October last year, it signed an MoU with state oil and gas company ENH to secure its involvement in future projects; today, that has come to fruition.
In October last year, anti-corruption organisation CIP highlighted the case of Petroinveste, a company sponsored by political heavyweights from Cabo Delgado that wanted to be given a seat in one of the consortia exploring new oil and gas fields in Mozambique. In the event, petroleum industry regulator INP rebuffed Petroinveste’s attempt - but the case of Profin and this pipeline project is a reminder that as Mozambique's gas boom develops, deals of this nature will need to be watched closely.
As well as gas, Cabo Delgado is also home to perhaps Mozambique’s next most promising extractives story - graphite. Today brought news of mining company Triton Minerals, which is switching its focus to its exploration blocks at Ancuabe, just 90km from Pemba port, rather than its project at Balama North. Triton’s main competitor in the space, Syrah Resources, is also at Balama and is planning to export through Nacala port thanks to its better facilities.
SEE: Mozambique graphite miner switches focus to project near Pemba port
Graphite is a key ingredient in modern batteries and a global switch to renewable energy is one of the phenomena driving the graphite investment story. Others are still investing in coal, however, and the head of Saudi power firm ACWA told Zitamar News this week they are hopeful of winning lending for their coal-fired power plant at Vale’s Moatize mine from a range of multilaterals and export credit agencies.
SEE: Mozambique coal-fired power project seeks multilateral lender support
This morning, the long-trailed exit of Barclays from the African continent was confirmed - on the same day its African subsidiary announced a very profitable 2015. The UK bank’s departure is not because it is unsatisfied with the African arm’s performance, but more that it wants to streamline its operations for regulatory reasons.
SEE: Barclays confirms plan to quit Africa
Goings-on in Mozambique recently might make Barclays happier to be leaving, however. Global Alliance, which Barclays owns through South African financial services group Absa, has suspended certain members of its management team for as yet un-defined misconduct. Another one for the muck-rakers to keep an eye on.
SEE: Global Alliance management suspended pending investigation
Have a great week.