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FID Rovuma Basin-area 4: Mozambique to become a middle-income country

Mozambique could start a development process, becoming a middle-income country with the production of onshore Liquefied Natural Gas (LNG) in 2024 and offshore LNG in 2022, following the Final Investment Decision (FID), recently announced in Maputo by Anadarko.

In the next 5 to 6 years, a significant increase in economic activities in Mozambique is expected, with both projects having an obligation to Local Content, which in the case of area 1 is US$ 2.5 billion, which is why this FID will have a positive effect on the future of the Mozambican economy.

Paul Eardley-Taylor, Head of Oil and Gas from Southern Africa at Standard Bank took part in the panel “Africa on the Cusp of an LNG Boom” at the 12th US-Africa Summit, and considered that with time, gas sales will generate revenues that could benefit Mozambicans: “This is the first of two FIDs that are expected to occur this year”, he said.

Since 2013, Standard Bank has worked in area 1, whose operator is Anadarko, where, in addition to providing financial services, it has carried out a macroeconomic study for the Liquefied Natural Gas project, which was the subject of the Final Investment Decision, recently announced by the US multinational company.

“Disbursements are still being finalized. However, Standard Bank will allocate a significant amount to the financing of each commercial credit line and South African export credit line is expected to play a large role in the financing of Mozambique's LNG project", he stressed.

In another development, Standard Bank's Head of Oil and Gas from Southern Africa said that in the LNG market, Mozambique may play a crucial role as global demand for LNG is expected to increase by 4 percent per annum, estimating that around 430  million tons of LNG will be needed by 2040, with Mozambique being able to supply up to 25 percent of this incremental demand.

LNG can be exported directly to Asia, to main markets such as India, China, Korea and Japan. Mozambique can also export LNG to Europe as some European countries reduce their natural gas production. Thus, Mozambique is expected to become the world's number 4 or 5 supplier of LNG.

“Mozambique's LNG project represents a series of investments of US$ 128 million that can be allocated in the Oil and Gas and associated sectors in Mozambique by 2025. What happens in the world, and will not be an exception for Mozambique is that there are several opportunities for the participation of the Mozambican economy”, he further explained.

In addition to several jobs resulting from the indirect induced economic effect of the LNG project in the Rovuma basin, there are several Local Content obligations in the two onshore projects, in the order of US$ 5.5 billion, and the percentage of Local Content obligations will increase in the future.

Standard Bank intends to establish partnerships through the different operational areas to assist, through its Business Incubator, companies that will arise or grow as a result of the implementation of LNG projects in the Rovuma Basin in Cabo Delgado.

According to Paul Eardley-Taylor, Standard Bank’s Head of Oil and Gas for Southern Africa, the bank recently participated in the tender for the financing part and should allocate a significant amount to each of the facilities, whose financial deal is expected to be completed by the end of this year.

“In the future, in addition to the credit we will allocate, Standard Bank intends to continue to offer financial services to the LNG project and also provide financing and banking services for the Rovuma Basin LNG project”, he concluded.

Events & Social Responsabilities

Standard Bank launches Africa-China Agent

Standard Bank launched on Wednesday, December 4, in Maputo, the Africa-China Agent (ACAP), an accredited commercial agent, that will assist the national business community in establishing contacts, make evaluation and communication with Chinese suppliers and sellers, as well as managing the process of importing quality goods and services into this Asian country efficiently and safely.

Private Banking Newsletter November 2019