One of the world’s poorest countries, Mozambique is anticipating a major economic boost after signing a deal with Italian oil and gas firm Eni that kickstarts a project to pump of billions of cubic metres of offshore natural gas.
The government is now seeking billions for infrastructure development as well.
The contracts signed 1 June in Maputo, capital of the east African country, commit Eni to drilling, construction and installation of a novel Floating Liquefied Natural Gas (FLNG) unit to start extracting around 450 billion cubic metres of natural gas that it discovered in 2012 and which it has agreed to sell to BP for the next 20 years.
"We’re finally transforming this resource into money," said the country’s president, Filipe Nyusi, reports Bloomberg. "We expect it will help us to bring the economy back to the performance of the last decade."
The project used a novel Floating Liquefied Natural Gas (FLNG) unit to start extracting around 450 billion cubic metres of natural gas (Eni)
Eni said the project, known as Coral South, located in Area 4 of the Rovuma Basin, would "transform Mozambique’s economy", even with the current low prices of oil and gas.
Anticipating a surge in development, the Mozambique government wants up to $4bn in foreign investment for infrastructure, and government ministries are converging in the central city of Tete this week for a forum to lure national and international partners, according to a report.
There is even talk of a new railway joining the north and south of the country, though a feasibility study has not been done.
Sealing the deal with Eni will come as a huge relief in Mozambique, which has been struggling with a debt crisis. According to Bloomberg it failed to make an interest payment on a Eurobond in January, becoming the first African nation to default in six years.
"This is really good news for the government of Mozambique," Alasdair Reid, research manager for the region at Wood Mackenzie, told the news agency. "It demonstrates that, despite ongoing credit issues, there is still enough belief in the investment climate for partners to raise finance and move projects forward."
The FLNG unit will have the capacity to produce around 3.4 million tons of gas per year, and will be the first FLNG in Africa and only the third globally, Eni said.
Construction will be financed through project finance covering around 60% of its entire cost – the first project finance ever arranged for an FLNG unit. The financing agreement has been subscribed by 15 major international banks and guaranteed by five export credit agencies, Eni said.
Eni is the operator of Area 4, through its participation in Eni East Africa (EEA), which holds a 70% participating interest in the concession while Portugal’s Galp Energia, South Korea’s Kogas and Mozambique’s Empresa Nacional de Hidrocarbonetos (ENH), each hold 10% stake.
Eni holds 71.4% shares of Eni East Africa, with China’s CNPC holding 28.6%.
In March 2017 Eni signed an agreement to sell 50% of its shares in EEA to ExxonMobil, which is subject to clearance from Mozambican and other regulatory authorities.
Top image: After the signing on 1 Jun 2017, Maputo. In the centre are Mozabique’s President Filipe Nyusi and Eni’s CEO Claudio Descalzi (Eni via Twitter)