Mozambique attracts investments totalling US$90 billion to energy and mining sectors

28 May 2012

Over the next few years Mozambique is set to receive estimated investments of US$90 billion for projects in the energy and mining sectors, which is seven times the current value of the country’s economy, according to the Economist Intelligence Unit (EIU).

In its latest report on Mozambique, the EIU said that the country, “is in the initial stages of sustainable expansion of foreign direct investment, as a result of its energy and mining potential.”

“Investments that are underway or proposed include mining projects, railroads, ports and other facilities, as well as hydroelectric and thermal power generation,” the EIU said.

The investment figure, of US$90 billion, includes projects that are underway and in their initial stages and is over seven times the country’s current GDP (US$12.4 billion).

Some US$21 billion is earmarked for power generation and US$68 billion for natural gas projects in Cabo Delgado province, including US$18 billion from US oil company Anadarko Petroleum and US$50 billion from Italy’s ENI.

“The amount of investment is huge for Mozambique or for any other economy,” the report said.

Although some of the projects still have no precise schedule set out, it is expected that most of them will move ahead in the next 10 years.

According to the EIU Mozambique “seems to be on the edge of an expansion of the energy sector that promises to turn the country into a significant African energy producer.”

More recently, ENI raised the capacity estimates for its gas blocks in the Rovuma Basin by 10 trillion cubic feet, to 40 trillion.

“Total gas reserves in the area may be bigger, as ENI plans to drill another four wells by the end of the year,” the EIU said.

A sign of the level of interest of large groups in Mozambique is the ongoing “battle” between Royal Dutch Shell and Thailand’s PTT for Irish company Cove Energy, which ahs an 8.5 percent stake in the consortium led by Anadarko Petroleum.

Expecting offshore natural gas production to begin after 2018 the Mozambican government plans to launch another round of exploration licenses for blocks in the Rovuma Basin, this time in the south of the basin.

Alongside this the authorities have announced a plan to increase the State’s maximum stake, via oil and gas company Empresa Nacional de Hidrocarbonetos (ENH), in future oil blocks, from 25 percent at the moment to 40 percent.

“Raising the State’s stake is expected to be one of the main reforms to the country’s new mining legislation,” said the EIU.

With this new mining code, which will also cover gas exploration, the government will also seek to tax mergers and acquisitions and set out stricter rules for the social projects of mining companies.

“However, the new law is not expected to increase production and taxes on companies, which are considered to be internationally competitive and will therefore not put investors off, especially given the extent of Mozambique’s mineral riches,” it said. (macauhub)