Impasse with Mozambican creditors delays megaprojects, increases their costs – BMI

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Impasse with Mozambican creditors delays megaprojects, increases their costs – BMI

12:20 CAT | 21 Aug 2017

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The BMI Research consultancy says negotiations between public debt holders and the Mozambican government could raise the cost of financing megaprojects and delaying their implementation.

“Divergences between the government and holders of sovereign debt could increase borrowing costs and thus delay projects,” the Fitch Group consultant analysts write in their report on the oil and gas sector in Mozambique.

In the document, which Lusa had access to, BMI Research says that among the threats to the development of this fundamental sector to the Mozambican economy are “low oil prices and low availability for capital investment”, which could delay projects under development or in preparation until 2026.

In addition to a slowdown in demand in the Asian market, analysts point out that delays in the projects are dangerous because Mozambique faces strong competition in the gas sector, despite having seen some of the largest natural gas discoveries in recent years.

Natural gas and megaprojects in this area are fundamental to Mozambique, which has attracted the interest of the largest multinationals in this area due to the discoveries that have been made both on and offshore.

In addition to the findings, BMI Research sees the country’s strengths as being “major offshore exploration operations and major discoveries so far”, as well as a geographic position close to Asia and the approval of the Coral Development Plan, “the first approved by the government for the Rovuma Basin, and which indicates that the projects are ongoing”.

Mozambique, however, also faces several challenges, such as “the underdeveloped physical infrastructure and the lack of a Final Investment Decision despite the regulatory framework being approved”.

Source: Lusa