Mozambique: Organisation wants staggered state investment in gas megaproject

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Mozambique: Organisation wants staggered state investment in gas megaproject

1:11 CAT | 24 Jun 2020

File photo: ENH

The Centre for Public Integrity (CIP), a Mozambican civil organisation, said today that the National Hydrocarbon Company (ENH) should stagger its participation in the Rovuma Basin Area 1 gas project, in order to reduce the country’s debt.

“ENH’s participation in this project is important and signals the state’s interest in monetising the resource, but the current economic situation in Mozambique requires a different approach to economic governance,” the CIP analysis comments.

Considering that the Mozambique LNG project, led by French oil major Total, will have two implementation phases, “in this phase, ENH could, given its limited financial capacity” and the market uncertainty “reduce its share from 15% to 5%”.

This share could be made profitable to finance the rest, the organisation said.

The CIP suggested reducing the participation, by pocketing money to fund the expansion of its participation in the second phase.

According to the CIP, the law would allow such a strategy, and the time to take this decision is now, with the megaproject only days away from signing the financial project with banks and credit bureaus, as “the situation of already deficient public accounts” is not to be further aggravated.

The Minister of Mineral Resources and Energy, Max Tonela, announced on Friday that ENH intends to find cheaper financing than it currently has, to pay for their participation in the largest-ever natural gas project, currently under construction in the country.

“There is an agreement” with the other Area 1 partners, led by Total, to finance ENH’s 15% share in the construction phase, Minister Tonela said, but “as a company, ENH must maximise its return on investment, and is working with financial advisors to find alternatives that will lower the costs of the operation,” he added, without advancing further details.

In November of last year, raising approximately US$1.5 billion for ENH’s participation in Area 1 was the most expensive project presented at an investment forum organised by the African Development Bank (AfDB) in Johannesburg, South Africa.

Source: Lusa