Investment of US$700 million promises to take Mozambique to the cutting edge of biofuel production in Africa

29 October 2007

Maputo, Mozambique, 29 Oct – Investment committed to biofuel projects in Mozambique totals US$700 million, which will put the country at the cutting edge of “clean” energy production in Africa.

The government strategy of increasing biofuel production had been marked by announcements of small and medium-sized projects, but is now gaining momentum, after Brazil’s Petrobras and Italy’s ENI said they were in discussions to launch projects in Mozambique, and, this month, the investment contract for the Central African Mining and Exploration Company (CAMEC) was officially signed.

CAMEC, historically linked to mining and sale of agricultural products in Africa, has pledged to invest US$510 million over the next few years in producing 120 million liters of ethanol from sugar cane, in the Massingir district, Gaza province, as well as generating electricity for local consumption.

The project includes planting 30,000 hectares of sugar cane, creation of 7,000 jobs and have annual income of US$40 million as of its launch in 2010.

The focus on biofuels is global and particularly attractive to African countries, which generally have fertile soil available in abundance, appropriate weather conditions for planting most oil-rich crops, as well as cheap and widely-available labor.

Mozambique is reaping the benefits of is political stability and favorable position – in comparison with other African countries – in governance indices, which have allowed to fall into favor with international development support institutions, donors and investors.

Mahomed Rafique, the director of Mozambique’s Center for Investment Promotion said last week that foreign direct investment (FDI) in Mozambique was this year expected to total US$9 billion.

This investment figure was mainly driven by the Nacal refinery project (US$5 billion), the CAMEC project (US$510 million) and “two other larges projects being analyzed,” which he did not specify.

Petrobras and Italy’s ENI are yet to provide details of the partnership they announced in March produce ethanol and biodiesel in Mozambique Brazil, after having presented details of their first project in Angola.

Recently, several local press reports noted a visit by the Petrobras director for international markets, Nestor Cerveró to have meeting with Mozambique’s energy minister.

Brazil, which is side by side with the United States in world ethanol production, has positioned itself as a privileged partner of Mozambique, on a public and private level and the Mozambican government has been entirely welcoming.

In fact, the high point of a September visit by president Armando Guebuza to Brazil was a bilateral cooperation agreement in the area of biofuels outlining technical exchange between the countries, training of Mozambican staff to operate in the biofuel sector and support from Brazil for programs of sale and use of biodiesel and ethanol in Mozambique.

The two countries also agreed to set up a working group, with representatives from both countries, which before March of next year will draw up a report on the conditions for biofuel production in Mozambique, using the so-called “Brazilian model: – which is based on the intensive farming of genetically-modified sugar cane, with high levels of production, unlike the US system which uses maize.

A previous study on the potential of biofuels in Mozambique ordered by the government from US consultancy Ecoenergy, suggested that jatropha, castor oil, African palm and coconuts grown in the country had the necessary conditions for biodiesel production.

Sugar cane, maize and manioc could be used for ethanol production, the same study said.

It is estimated that the country has the capacity to produce around 40 million liters of biodiesel per year, as well as 21 million liters of ethanol, in an area of around 5 million hectares.

To define a global strategy for development of this sector – establishing priorities for plantation areas, raw materials, technologies and markets – the government is concluding a development plan which, according to energy minister, Salvador Namburete, will be presented by the end of this year.

The promotion of this sector is seen not only as an instrument to attract investment and stimulate economic growth, to take development to poorer areas of the country, but also as a way of reducing the country’s dependence on importing fossil fuels, on which its spends around US$170 million per year.

In order to support Mozambique in establishing energy independence via fuels of vegetable origin, Sweden has sent technicians to Mozambique, who have been on the ground since May to support project development.

Until CAMEC’s investment was announced, the main biofuel project in the country was that of state oil company Petromoc and agricultural cooperative Cofamosa, worth an estimated US$125 million.

This project includes creation of an ethanol distillery in Moamba district, which initially some 10,000 hectares of sugar cane will be sown, and in a later phase 29,000 hectares will be used.

Another project being carried out by the government itself includes spending US$14 million on a factory for producing ethanol from sugar cane in Maputo province, for export to the European Union.

Mozambique Biofuel Industries (MBI), owned by South African investors, plans to invest some US$18 million on a 500,000 hectares plantation of oil-rich crops for ethanol production, and an additional amount on a distillery.

More recently, Canada’s Energem Resources announced it would invest up to US$5.5 million on biodiesel production from jatropha, in a 5,000 hectare area, which “at the project’s cruising speed,” would total 60,000 hectares. (macauhub)