Mozambique’s economic growth dependent on natural gas projects, EIU says

20 September 2019

The start of exploration of natural gas deposits in the Rovuma basin in 2023 will see Mozambique’s economy growing at a rate of 7.5% that year, said the Economist Intelligence Unit (EIU) in its latest country report.

Until then Mozambique will have much more modest economic growth rates, starting with this year when EIU analysts predict a 0.5% contraction before recovering to positive values, starting with 3.0% in 2020.

The years 2021 and 2022 are also expected to grow at a rate of 5.6% in both cases as economic recovery progresses following the damage caused by two tropical storms this year.

The report noted that the Anadarko Petroleum Group, meanwhile acquired by the Occidental Petroleum Group, and partners made the final investment decision of the Area 1 block in June 2019.

It also recalled that state-owned oil and gas company ENH has a 15% stake in this project and has therefore raised US$2.3 billion, a process which was postponed by the company’s management based on the need to achieve better conditions.

The recent announcement that almost all creditors of Eurobonds issued by the state-run Mozambican tuna company (Ematum) have accepted the restructuring proposal put forward by the Ministry of Economy and Finance could help ENH achieve those conditions.

The EIU document also mentions the announcement by the ExxonMobil group to postpone the final investment decision of the Area 4 block due to political and security uncertainties in Cabo Delgado province, where radical Muslim groups have carried out attacks on facilities and people.

“We anticipate, however, that commercial interest in Mozambique will continue to increase, given that the economic opportunities (arising from the exploration of natural gas) are enormous,” it said.

However, the same document noted that the world market for natural gas is currently saturated, with supply exceeding demand, “so we don’t expect that significant work on shore installations could start before 2020.”

As a result, gross fixed capital formation, which this year will grow by 8.2%, is expected to be between a maximum of 55.0% in 2020 and a low of 30% in 2023, as the companies involved in those two natural gas projects start to invest heavily. (Macauhub)