Mozambican oil company ENH expected to secure funding for natural gas project

25 June 2019

Mozambique’s state-owned oil and gas company ENH is expected to secure funding to ensure that it participates in the natural gas projects in the Rovuma basin, the Economist Intelligence Unit (EIU) reported.

The Area 1 project, led by US group Anadarko Petroleum Corporation, requires each partner to raise the necessary funds to guarantee its participation, and in the case of ENH, which holds 15% of the consortium, this total US$2 billion.

The EIU said that the state-owned company should have no difficulty in raising that sum of money, despite all the problems related to debts taken on by public companies with State guarantees whose interest was never paid or the capital paid down.

The most recent EIU report on Mozambique recalls that the Area 1 project is financially sound, involves credible foreign companies, the process is transparent and has been approved by the country’s parliament, which was not the case with the issuance of Eurobonds and the two loans contracted by three public companies in the so-called hidden debt scandal.

The start of exploration of natural gas deposits, whose final investment decision for the Area 1 block was announced on 18 June, will play an important role in the growth of the country’s Gross Domestic Product (GDP), which the EIU projects will reach 7.5% in 2023.

This year Mozambique’s economy is expected to contract by 2.2% and return to growth in 2020, with rates of 2.7% and 5.6% in 2021 and 2022.

The EIU nevertheless recalls that supply currently exceeds demand in the world natural gas market, although the final investment decision of the Area 1 block was taken after the consortium had secured long-term supply contracts of 11.18 million tonnes of natural gas per year, specifically in the Asian markets.

The economic contraction expected for this year stems from large-scale damage to infrastructure, buildings, ports and agricultural fields caused by Cyclones Idai and Kenneth. (Macauhub)