Mining & Energy
World Bank supports rural electrification to decisively curb poverty in Mozambique
The Economist Intelligence Unit (EIU) said yesterday that the involvement of the US oil company Exxon “increases confidence” in gas exploration in Mozambique and that the Eni deal is expected to bring significant revenues to the government.
“The involvement of Exxon, which has deeper pockets and more experience than its Italian partner, adds a level of confidence that the Area 4 exploration license will be developed as planned,” write the experts from the economic analysis unit of the British magazine The Economist.
In an analysis of the acquisition by Exxon for US$2.8 billion of 25 percent of Eni East Africa, which controls exploration in the Rovuma Basin, EIU says that “along with the license of Area 1 [operated by Anadarko], this could end up putting Mozambique among the largest exporters of liquefied natural gas in the world”.
Looking at the deal, the EIU notes that US$2.8 billion which will be paid when regulators approve the purchase, shows that “industry momentum has changed significantly” in recent years, with the liquefied natural gas price falling almost 50 percent and companies cutting development and expenditure plans as a result.
On the other hand, notes the EIU, for the Government, taxes on the business will be very important to balance the public accounts, although the executive will hardly be able to charge the 32 percent provided for by law.
“The tax implications of the agreement are still be disclosed, but the levying of 32 percent in tax will have to be renegotiated,” says EIU, noting that in 2013 Eni were supposedly liable for US$1.4 billion for a similar deal but ended up paying only US$400 million.
“While the crippling Government liquidity crisis means that the executive ca not afford to reject any potential sources of funding, it is desperate to get gas projects into the development stage and is not in a strong position to negotiate,” the report reads. “A discount on the 32 percent should already have been agreed,” the analysts conclude.
Mozambique has reserves of at least 160 trillion cubic feet of gas, catapulting the country onto the podium of the most promising countries in the sector, along with Australia and Qatar.
The Area 1 consortium is led by US-based Anadarko and has identified large quantities of natural gas, as has the consortium led by Italy’s Eni, which operates Area 4 and which includes Portugal’s Galp.
One of the advantages for Mozambique is its proximity to the Asian market, doubtless one of the points made by the President Filipe Nyusi of Mozambique when he met Exxon Executive Chairman Darren Woods in Beira at the end of last week to discuss the deal between Exxon and Eni.
President Nyusi’s visit to Japan is part of an attempt to find new customers for Mozambican gas. He is accompanied by the Minister of Mineral Resources and Energy, Letícia Klemens, who, according to the international press, said on their arrival in Tokyo: “On this visit to Japan, we must showcase our energy, coal and gas resources. We see Japan as a major customer – we need Japan to buy our gas.”Source: Lusa
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