Mozambique 24 June: Bite the bullet, or muddle through?
Good afternoon. Mozambique’s government appears to have kicked into gear with a string of recent announcements that could finally see northern Mozambique start to realise its huge gas potential.
Hot on the heels of our report last week that the Eni-led Coral FLNG project can move ahead with its engineering, procurement and construction contract, today we report that the offtake agreement – under which British oil and gas giant BP will buy the project’s entire output – has also been approved, along with the right for Eni to start final negotiations on a number of other key deals. .
SEE: Eni wins approval for Mozambique LNG sales contract
Onshore Cabo Delgado, Wentworth Resources has won the right to proceed appraising the Rovuma Onshore Concession that was operated by Anadarko until last August. Wentworth is optimistic about finding viable amounts of gas which it could develop – as it has across the border at Tanzania’s Mnazi Bay.
SEE: Wentworth Resources moves forward with onshore Mozambique gas block
Anadarko, meanwhile, has appointed a new country manager to replace John Peffer, who will be disappointed at not having seen the Area 1 project through to a final investment decision.
SEE: Anadarko appoints new country head to lead Mozambique LNG project
All of these projects are far from a done deal and it remains to be seen whether international investors and financiers are ready to commit huge amounts of cash to Mozambique. The economic outlook remains bleak, with Standard Bank today cutting their 2016 growth forecast to 2% - the first time we can recall anyone going public with a figure below 5%. The IMF today concludes its visit to Mozambique, and should soon publish its own updated forecast.
SEE: Standard Bank: Mozambique GDP to grow 2% in 2016, public debt ‘unsustainable’
President Filipe Nyusi will hope that a new appointment this week can bring some impetus to the economy – and in particular the agriculture sector, one of four pillars his government has highlighted to help lead Mozambique’s development. Agricultural economist Ragendra de Sousa has been appointed deputy minister of trade and industry, a post that has stood vacant since Omar Mitha was moved to ENH last year.
SEE: Mozambique President appoints deputy minister of trade and industry
Arguably, revitalising agriculture should be Mozambique’s top priority, with 1.5 million going hungry and imports getting ever more expensive. There is also potential for exports, however, with an Indian delegation arriving this week to discuss a project to grow pulses in Mozambique for the Indian market. The Brazilian-Japanese ProSavana programme under the tutelage of agriculture minister Jose Pacheco remains on the drawing board after many years, and the Indian project will hope for better fortunes.
To really pull Mozambique out of the mire, however, economist Roberto Tibana argues today that the government needs to “bite the bullet” and make deep economic and political reforms. That would be the best of three potential scenarios Tibana foresees – but he concedes the government is more likely to dig in its heels, and hope to muddle through. Read his analysis here:
SEE: Mozambique Scenarios 2016-2020
Have a great weekend.
RECENT POSTS
Standard Bank: Mozambique GDP to grow 2% in 2016, public debt ‘unsustainable’
Mozambique President appoints deputy minister of trade and industry
Anadarko appoints new country head to lead Mozambique LNG project
Wentworth Resources moves forward with onshore Mozambique gas block
