Mozambique’s long-awaited LNG project, which could transform the country into a leading gas producer, has been delayed by COVID-19 and other financing issues, says Ed Hobey-Hamsher, senior Africa analyst at global risk consultancy Verisk Maplecroft.
“It makes it increasingly likely that Rovuma LNG, the operator of the long-awaited offshore gas project Area 4, will reach a final investment decision in the first half of 2021,” he writes in an exclusive op-ed for African Business.
The 14-day quarantine for all new arrivals and restrictions on internal movement will pose practical challenges for its project partners. A fledgling LNG sector and shallow labour market mean Area 4 is very dependent on the expertise and skills of international staff.
Senior managers will struggle to access the project site and executives won’t be able to meet government officials and their national oil company, Empresa Nacional de Hidrocarbonetos (ENH), counterparts in Maputo. Both are necessary measures to pave the way to the final investment decision.
However, COVID-19 related restrictions in Mozambique may be the least of Rovuma LNG’s problems, he adds.
In fact, financing will play a bigger role in pushing back the final investment decision into 2021. COVID-19 has reduced global demand for gas and depressed LNG prices.
Additionally, indirect stakeholder ExxonMobil withdrew an application for $2bn of funding from EXIM Bank, the US export credit agency. This followed EXIM Bank’s unfavourable view of the participation of the Chinese state-owned China National Petroleum Corporation.
“Therefore, we see H1-2021 as a more feasible timeframe for the Area 4 partners to reach final investment decision,” he says.
Read the full post here.