Entry into the gas sector requires sovereign guarantee from Mozambique

26 October 2018

The two-billion-dollar sovereign guarantee that Mozambique will issue to enter the gas business will have a five-year deadline, said the country’s deputy minister of Energy and Mineral Resources.

This is a sovereign guarantee that is different, in every respect, from the state backing provided in the hidden debt case, added Sousa in an interview with Portuguese news agency Lusa.

“These are totally different things, as this is very well studied and we have to find a way to explain it publicly,” said the deputy minister, admitting that whenever there is talk of sovereign guarantees there is “panic” among the Mozambican population .

This is because the country is still unaware of what happened to US$2 billion in loans taken on using government guarantees, without informing either the country’s parliament or its international partners, in 2013 and 2014 in what became known as the hidden debt scandal.

This time, the guarantee will be under the scrutiny of all parties involved and has a limited scope, said Sousa.

The guarantee involves state oil and gas company Empresa Nacional de Hidrocarbonetos (ENH) taking a stake in the consortia that will explore the country’s natural gas deposits.

In the case of the consortium that will operate Area 4, starting in 2022, the partners will “finance the ENH share” worth about US$500 million – that is, its share in the company, led by ENI and ExxonMobil.

In relation to Area 1, whose consortium is led by Anadarko Petroleum, each partner has to fund its own stake, with ENH responsible for providing investment of US$2 billion.

Sousa said that, unlike the other partners, ENH does not have guarantees, and that in this case the Mozambican State must take on the role of guarantor, issuing a guarantee of US$2 billion valid for five years.

This guarantee is stipulated in the government’s draft of the 2019 State Budget, which will be discussed by the end of the year by the Mozambican parliament. (macauhub)