A deepwater drillship (illustrative picture_rawpixel)
After a two-year break following an out-of-control insurgency in its most northern region, Mozambique has begun called on investors to return to the country to continue developing energy and infrastructure projects with a view to improving the economic outlook. Although no date has been set, this turn of events follows months of slow but successful security operations carried out by the Mozambican government and its allies that have led notably to the elimination of several insurgent leaders. With the situation still hot, but much calmer, economic questions are once again in the spotlight.
Mozambique ramps up internal defence
Back in August, a series of joint operations by the Mozambique Armed Forces (FADM) and partner armies, including the Southern African Development Community (SADC) and the Rwandan defence forces, liquidated three leaders of the Ahlu Sunna Waljama'a (ASWJ) militant terrorist group, which has been terrorising the Cabo Delgado province for years, causing major disruption to infrastructure projects and the local economy. "Terrorist Abu Kital, who held the position of deputy operations commander for the Al Sunna Wall Jamat terrorist group, was shot dead," the Mozambique Defense Forces (FADM) announced in a statement. According to the statement, the FADM "continues to act for the security and defense of Mozambique and Mozambicans. However, at present they are gathering further information on other movements and other [ASWJ] members; this will be published in due course.”
The Cabo Delgado region has suffered from years of instability, including the ongoing presence of the Islamic State-linked militant group, which represents just the tip of the iceberg. The fighting has led to the deaths of over 4,700 people, almost half of them civilians, according to a report by the conflict-monitoring organisation ACLED, and the displacement of around one million inhabitants in the region.
The region is rich in natural gas and rubies. Exploiting these resources, some of which elude official channels, is a major challenge, and has given rise to a great deal of covetousness, particularly on the part of Islamist militants whose violent actions are often combined with various forms of trafficking. Widespread poverty and a lack of infrastructure in the Muslim-majority region has meant that it has become a recruitment hotbed for the militant group.
The improving security situation in the region will come as music to the ears of the local population, who can gradually return to their homes, and of authorities who have long being trying to kickstart the economy through local investments and infrastructure projects. The Governor of Cabo Delgado, Valige Tauabo, has recently called for businesspeople to return to districts badly affected by armed violence in the province, declaring that conditions have drastically improved and activities can resume. “The population returned voluntarily and has already settled in almost every district [affected by the insurgency]. At this moment, we can say that at least 65% of the population is back in their districts,” said Tauabo,
But for many, the crucial aspect of this conflict is not military but socio-economic. “The conflict is declining, because Mozambique has much more military capabilities, it has much more soldiers on the ground, the conflict has reduced,” but “the causes that facilitated the emergence of the conflict in north-eastern Cabo Delgado have not been resolved,” said Borges Nhamire, a researcher at the Institute for Security Studies (ISS Africa). A resurrection of infrastructure projects could therefore help boost the struggling local economy.
A relaunch of the LNG project?
Although the situation on the ground remains volatile, there is real hope that one of the country’s primary energy projects, the Mozambique LNG project, may be about to resume. Initially supported by American energy company Anadarko, the onshore project started with the discovery of a vast quantity of natural gas off the coast of northern Mozambique in 2010, leading to a $20 billion Final Investment Decision in 2019. The plan is to extract approximately 65 trillion cubic feet of recoverable natural gas and includes a two-train project with the ability to expand up to 43 million tonnes per annum (MTPA).
In April 2021, the European and Asian consortium decided to withdraw its staff, citing force majeure, after a number of attacks in the area by the aforementioned jihadist rebellion affiliated to the Islamic State. Two years later, the area around the site, which is still under construction, has been largely secured, notably by the Rwandan defence forces, but authorities are remaining extremely cautious.
Nothing has been made official, and the security situation in much of the inland area of the Cabo Delgado region is far from satisfactory, but the situation seems to be looking brighter. Talks between stakeholders are multiplying, even abroad, as shown by a recent discussion between India's petroleum minister, Hardeep Singh Puri, and the CEO of Totalenergy, the leading consortium member, at a meeting in Abu Dhabi on India's energy challenges. This large Asian country has huge needs for gas to get rid of coal and is a key partner in Mozambique LNG, with three companies involved. Recent reports of improving conditions in the key project area are therefore of interest to this major geopolitical and economic player.
The continuation of such energy projects in regions beholden to conflict and insecurity or economic instability is not unheard of. Indeed, some countries have turned to domestic LNG projects to boost faltering economies. Venezuela, for example, has been discussing a possible $1.5 bn deal to capture its methane emissions and export them as natural gas with the help of Eni SpA and Repsol SA. This deal would be advantageous to Venezuela, once one of the world’s largest crude producers, and help it vastly reduce pollution from its state-owned oil company’s facilities while bolstering the EU’s natural gas supplies in the context of Russia’s war with Ukraine.
In Iraq, where the Islamic State has been largely defeated but where security concerns remain the norm, three new energy contracts with UAE-based Crescent Petroleum have been signed, aiming to develop three oil and gas fields in the country. India has also been exploring the idea of building liquefaction units in Iraq to convert flared gas into LNG. “Iraq flares a lot of natural gas and we are a large importer of gas. So, we are exploring if our companies can set up plants in Iraq to liquefy that gas into LNG,” said an Indian government official to the Indian Express.
A virtuous circle
In addition to the technical and operational aspects of taking over the project, Mozambique LNG represents a key socio-economic challenge for one of the world's poorest countries. The project is expected to provide significant economic advantages to the region, including expected number of induced jobs, marked in particular by requirements in terms of local employment. The initial construction, operation and maintenance stages are expected to create 15,000 jobs. These have already begun to be implemented despite the work stoppage, particularly in terms of vocational training on the initiative of the energy companies, such as the training of a total of 2,500 youths at the IFPELAC, Pemba Branch. Indeed, the country’s economy is expected to accelerate to 6% in the 2023-2025 period, according to the World Bank’s Mozambique Economic Update (MEU).
And this should herald the start of a positive cycle, with a sovereign wealth fund designed to manage the future gas windfall (gas production expected to reach 44.11bcm by 2032, with year-on-year growth averaging 24%) so that it benefits the whole country. This will also enable the development of decarbonised electricity, with solar and hydroelectric power on the agenda, including investments in the Cahora Bassa dam, one of the biggest on the continent, and the Mphanda Nkuwa Hydropower Project. For these projects to succeed, significant international investment is required.
Mozambique ramps up internal defence
Back in August, a series of joint operations by the Mozambique Armed Forces (FADM) and partner armies, including the Southern African Development Community (SADC) and the Rwandan defence forces, liquidated three leaders of the Ahlu Sunna Waljama'a (ASWJ) militant terrorist group, which has been terrorising the Cabo Delgado province for years, causing major disruption to infrastructure projects and the local economy. "Terrorist Abu Kital, who held the position of deputy operations commander for the Al Sunna Wall Jamat terrorist group, was shot dead," the Mozambique Defense Forces (FADM) announced in a statement. According to the statement, the FADM "continues to act for the security and defense of Mozambique and Mozambicans. However, at present they are gathering further information on other movements and other [ASWJ] members; this will be published in due course.”
The Cabo Delgado region has suffered from years of instability, including the ongoing presence of the Islamic State-linked militant group, which represents just the tip of the iceberg. The fighting has led to the deaths of over 4,700 people, almost half of them civilians, according to a report by the conflict-monitoring organisation ACLED, and the displacement of around one million inhabitants in the region.
The region is rich in natural gas and rubies. Exploiting these resources, some of which elude official channels, is a major challenge, and has given rise to a great deal of covetousness, particularly on the part of Islamist militants whose violent actions are often combined with various forms of trafficking. Widespread poverty and a lack of infrastructure in the Muslim-majority region has meant that it has become a recruitment hotbed for the militant group.
The improving security situation in the region will come as music to the ears of the local population, who can gradually return to their homes, and of authorities who have long being trying to kickstart the economy through local investments and infrastructure projects. The Governor of Cabo Delgado, Valige Tauabo, has recently called for businesspeople to return to districts badly affected by armed violence in the province, declaring that conditions have drastically improved and activities can resume. “The population returned voluntarily and has already settled in almost every district [affected by the insurgency]. At this moment, we can say that at least 65% of the population is back in their districts,” said Tauabo,
But for many, the crucial aspect of this conflict is not military but socio-economic. “The conflict is declining, because Mozambique has much more military capabilities, it has much more soldiers on the ground, the conflict has reduced,” but “the causes that facilitated the emergence of the conflict in north-eastern Cabo Delgado have not been resolved,” said Borges Nhamire, a researcher at the Institute for Security Studies (ISS Africa). A resurrection of infrastructure projects could therefore help boost the struggling local economy.
A relaunch of the LNG project?
Although the situation on the ground remains volatile, there is real hope that one of the country’s primary energy projects, the Mozambique LNG project, may be about to resume. Initially supported by American energy company Anadarko, the onshore project started with the discovery of a vast quantity of natural gas off the coast of northern Mozambique in 2010, leading to a $20 billion Final Investment Decision in 2019. The plan is to extract approximately 65 trillion cubic feet of recoverable natural gas and includes a two-train project with the ability to expand up to 43 million tonnes per annum (MTPA).
In April 2021, the European and Asian consortium decided to withdraw its staff, citing force majeure, after a number of attacks in the area by the aforementioned jihadist rebellion affiliated to the Islamic State. Two years later, the area around the site, which is still under construction, has been largely secured, notably by the Rwandan defence forces, but authorities are remaining extremely cautious.
Nothing has been made official, and the security situation in much of the inland area of the Cabo Delgado region is far from satisfactory, but the situation seems to be looking brighter. Talks between stakeholders are multiplying, even abroad, as shown by a recent discussion between India's petroleum minister, Hardeep Singh Puri, and the CEO of Totalenergy, the leading consortium member, at a meeting in Abu Dhabi on India's energy challenges. This large Asian country has huge needs for gas to get rid of coal and is a key partner in Mozambique LNG, with three companies involved. Recent reports of improving conditions in the key project area are therefore of interest to this major geopolitical and economic player.
The continuation of such energy projects in regions beholden to conflict and insecurity or economic instability is not unheard of. Indeed, some countries have turned to domestic LNG projects to boost faltering economies. Venezuela, for example, has been discussing a possible $1.5 bn deal to capture its methane emissions and export them as natural gas with the help of Eni SpA and Repsol SA. This deal would be advantageous to Venezuela, once one of the world’s largest crude producers, and help it vastly reduce pollution from its state-owned oil company’s facilities while bolstering the EU’s natural gas supplies in the context of Russia’s war with Ukraine.
In Iraq, where the Islamic State has been largely defeated but where security concerns remain the norm, three new energy contracts with UAE-based Crescent Petroleum have been signed, aiming to develop three oil and gas fields in the country. India has also been exploring the idea of building liquefaction units in Iraq to convert flared gas into LNG. “Iraq flares a lot of natural gas and we are a large importer of gas. So, we are exploring if our companies can set up plants in Iraq to liquefy that gas into LNG,” said an Indian government official to the Indian Express.
A virtuous circle
In addition to the technical and operational aspects of taking over the project, Mozambique LNG represents a key socio-economic challenge for one of the world's poorest countries. The project is expected to provide significant economic advantages to the region, including expected number of induced jobs, marked in particular by requirements in terms of local employment. The initial construction, operation and maintenance stages are expected to create 15,000 jobs. These have already begun to be implemented despite the work stoppage, particularly in terms of vocational training on the initiative of the energy companies, such as the training of a total of 2,500 youths at the IFPELAC, Pemba Branch. Indeed, the country’s economy is expected to accelerate to 6% in the 2023-2025 period, according to the World Bank’s Mozambique Economic Update (MEU).
And this should herald the start of a positive cycle, with a sovereign wealth fund designed to manage the future gas windfall (gas production expected to reach 44.11bcm by 2032, with year-on-year growth averaging 24%) so that it benefits the whole country. This will also enable the development of decarbonised electricity, with solar and hydroelectric power on the agenda, including investments in the Cahora Bassa dam, one of the biggest on the continent, and the Mphanda Nkuwa Hydropower Project. For these projects to succeed, significant international investment is required.
