The International Monetary Fund (IMF) predicts that Mozambique’s average growth rate during the first half of the next decade could reach the staggering figure of 24 per cent per annum.
This optimism is based on the assumption that gas processing facilities in the Rovuma Basin, in the far north of the country, will begin production in 2021.
In a report released on Thursday, the authors calculate that by middle of the decade half of the country’s output will be generated by natural gas.
Off the coast of the northern province of Cabo Delgado huge gas reserves have been found in Rovuma Basin Area 1 and Area 4 totalling an estimated 180 trillion cubic feet of gas. The two operators, US company Anadarko (Area 1) and Italy’s ENI (Area 4) are currently developing plans to build Liquefied Natural Gas (LNG) plants to market the gas.
The report expects the total investment in these two areas to exceed a hundred billion US dollars. Once production reaches its peak, Mozambique could become the world’s third largest LNG exporter after Qatar and Australia.
These predictions are based upon the expectation that the two operators will take their Final Investment Decisions (FID) by the middle of this year. However, the IMF acknowledges that gas prices have dropped substantially and further price decreases could pose risks to the viability of the planned liquefaction plants.
Despite this, the report assumes that LNG production will begin in 2021, with Area 1 producing about 5.5 million tonnes of LNG a year and Area 4 producing about three million tonnes a year. Funds from initial production are expected to finance the construction of additional LNG units, known as trains, leading to a total of 13 onshore trains and 4 floating trains.
This would have enormous implications for the country.
Not only would it provide employment, but would transform the financial resources available to the state.
The report uses the IMF’s own Fiscal Analysis of Resource Industries model to estimate that the average real GDP growth rate between 2021 and 2025 could reach 24 percent. It estimates that after LNG production reaches its peak in 2028, the real GDP growth will moderate to between three and four per cent, with the underlying non-LNG growth rate being around six per cent.
In conclusion, the report warns that “although the economic potential emerging from the projects is tremendous, macroeconomic and fiscal implications are quite sensitive to international commodity price developments and other risk factors, highlighting that the government authorities would be well-advised in taking a cautious approach”.
The impact of natural gas on the economy might be much greater than the IMF could possibly predict as new sources of oil and gas could be discovered. In October 2015 five international hydrocarbon companies were awarded the exploration rights for blocks in the Angoche area, off the coast of Nampula provinces, in the Zambezi Delta, and elsewhere in Mozambique. Over the next four years more than 691 million US dollars will be spent on the search for oil and gas in these areas.