Mozambique 2 June 2017: FID!
Good evening. The first of Mozambique’s Rovuma Basin gas projects is finally underway, after the Eni-led Area 4 consortium formally signed their final investment decision for the $8 billion floating LNG project on the Coral South field.
The project involved a number of compromises from the Mozambican side, as President Nyusi acknowledged at the signing ceremony in Maputo. It was worth it, he said, to get the projects going. The President of Eni assured the audience that Coral South is just an “appetizer” for what is to come in the Rovuma Basin.
SEE: Eni reaches FID on Coral South FLNG project in Mozambique
SEE: Eni to sign Mozambique offshore gas FID in Maputo this week
The Mozambique government continues to show flexibility to investors in the extractive industries. The Council of Ministers said this week that it has approved amendments to the ‘fiscal stability’ clauses in the petroleum and mining tax laws, though details remain scarce on what the changes are.
SEE: Mozambique prepared to offer oil explorers greater fiscal stability
SEE: Mozambique government to alter ‘absurd’ mining taxes
Among the mining projects likely to benefit from the changes - which also include a likely reduction in another set of mining taxes - is the Savannah Resources and Rio Tinto joint heavy sands project, which this week published a scoping study confirming that the project looks both viable and profitable.
SEE: Savannah-Rio Tinto Mozambique sand mine project could make $4bn over 30 years
President Nyusi will travel to the US later this month to address an Africa-US business forum. He will be able to take a message of optimism from Mozambique, where - as well as progress on the gas projects - the economy seems to be stabilising after 18 months of severe turbulence.
SEE: Mozambique President returns to the US this month
SEE: Metical stabilises as optimism returns to Mozambique’s economy
Nevertheless, there are still heavy clouds hanging over Mozambique. Missing this week was the executive summary of the Kroll report - which had been expected to be published by the end of the month - and any transparency on what went on behind closed doors at last week’s Frelimo Central Committee meeting. The ‘hidden debt’ deals still have a hand to play, which could yet shatter the fragile optimism that is taking hold.
SEE: Privinvest says MAM is ‘satisfied’ with delivery of Mozambique shipyards
Finally, there was controversy this week over the Bank of Mozambique’s decision to award the rescued Moza Banco to its own pension fund. Questions have been asked about whether the financial sector regulator should also own a bank, and whether the award was fair; so far, the central bank is defending itself saying it was a pragmatic decision to save a systemically important bank. More on this next week.
SEE: ‘A Mozambican solution’: Bank of Mozambique pension fund to buy Moza Banco
Have a great weekend.