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Sectors 2 April 2019

Standard Bank’s Head of Client Coverage, Luvuyo Masinda, explains the significance of Mozambique’s Liquid Natural Gas (LNG) prospects

Standard Bank convened various role-players in the Mozambique LNG project, who unpacked for South African clients the various opportunities arising out of pending developments in the area.

The Mozambique National Oil Company, ENH, Area 1’s Operator Anadarko Petroleum and Area 4’s onshore operator ExxonMobil, and South Africa’s Department of Trade and Industry apprised interested clients of the opportunities available from the pending onshore Mozambique LNG project (Mozambique LNG and Rovuma LNG).

Standard Bank has been involved in Mozambique’s gas sector since the early 2000s, in partnership with some of South Africa’s leading integrated chemicals and energy companies. It is important to highlight a few important observations on the game-changing nature of Mozambique’s offshore gas discoveries and why the subsequent production of LNG will change that country forever and offer major opportunities for our South African client base. Mozambique already has an LNG project under construction. Coral FLNG, in which Standard Bank was the only African bank at Financial Close, is envisaged to produce its first gas in July 2022.

Mozambique’s resources are huge, with a 150 Trillion Cubic Feet of LNG reserves, equivalent to 150 times that of Mossel Bay, or 24 billion barrels of oil, the equivalent of approximately five times what ExxonMobil found in Guyana since 2014, which itself was one of the world’s most exciting discoveries. 

The process of transforming those resources into individual LNG and Domgas requires an immense amount of investment. Our general assumption is that around USD128 billion needs to be spent between 2017-2025. 

Expressed another way, once Area 1 and Area 4 take their respective Final Investment Decisions (FID), the Afungi Site in Northern Mozambique will become the world’s most expensive project at around USD 55 billion. 

The process of developing LNG plants will automatically provide opportunities for multiple industrial, tertiary as well as service-based companies some of which may need to establish local presences to serve these plants. 

The following analogy indicates the magnitude of this project. The construction of Qatargas’ mega-trains required the use of 20,000 workers, who ate one million eggs a month. Mozambique is building two onshore projects in parallel. During the construction phase, workers would need to eat two million eggs a month. To lay two million eggs a month requires 60,000 chickens laying 1.2 eggs a day. 

This simple example shows the scale of the opportunity for South African businesses to target, in its neighbouring market, through a mix of providing content, services, direct investment and human resources.

We understand a few challenges remain to be resolved in Mozambique. Nevertheless, in time we believe that Mozambique will become the world’s fourth or fifth LNG player (most likely by the early 2030s). 

Standard Bank’s objective is to serve and partner our clients as we walk together on what is one of the largest and most exciting opportunities in the history of Standard Bank, since 1862.  We envisage that as a result of this development, Mozambique will change from a low-income country to a middle-income country over the coming years. We want to help our clients navigate into these growing markets and sectors. We are also convinced that this project will be transformative to Mozambique as a country, the economy and its people.