Energy & Mining



Already holding the third-largest LNG reserves in Africa, the country is set to become one of the world's top producers in the coming years.

Mozambique’s rapidly developing natural gas reserves, driven by growing FDI into the energy and natural resource sectors, has in large part contributed to its post-war progress; parallel to the government’s identification of the energy sector as a main area for investment in its national plan to combat poverty. Characteristic of resource-rich, import-dependent, growing economies, the country faces complex challenges across socio-economic indicators, and the key to effectively maximize their wealth lies in their ability to invest natural resource revenues in physical and human capital. Despite Mozambique’s abundant energy resources, only just over a quarter of the population is connected to the grid, while also exporting electricity to South Africa. To combat this disparity, development of domestic infrastructure within and across regions, increasing affordability of energy access across the country, promotion and participation of the private sector in the energy sector, and reduction of environmental impact of nonrenewable resources has been recommend by international organizations. The OECD in particular has recommended introducing policies to strengthen investment framework and better facilitation of land access for investors, in addition to implementing a coherent strategy for energy sub-sector development and increase competition in the power sector.

Instituto de Estudos Sociais E Economicos (IESE) informs that by 2030, the urban population is expected to double, GDP per capita to triple, GDP to be multiplied by four, though 18 million people could still be reliant on biomass for their energy needs with potentially five times more cars as today in the streets, all despite Mozambique’s potential to be among the top-five exporters of Coal and LNG globally. The skewed relationship between growth and investment trends has largely resulted from the country historically having depended on megaprojects in the extractive industries for foreign exchange and revenue, though the share of FDI into non-mega projects has gradually risen to 45% over the past five years. In addition, the new petroleum law states that oil and gas companies must be listed on the Mozambique Stock Exchange, in a move to further ensure that Mozambican citizens can benefit from megaprojects. New legislation also includes a special regime option for LNG projects in the Rovuma Basin, “to respond to the specific features of the Rovuma Project and to create the necessary conditions for its final approval, development, and operation throughout the concession period in conditions of economic viability and profitability,” informs Paulo Mendonça, E&P Country Manager Mozambique Galp Energia.


The country’s large sedimentary basins of natural gas hold immense potential for the economy, with three onshore gas reserve discoveries in Pande, Temane, and Buzi. As of January 2014, Mozambique’s total proven natural gas reserves rose to 100 tcf, placing the country as the third-largest proved natural gas reserve holder in Africa after Nigeria and Algeria, compared to modest natural gas production of 154 bcf in 2012. The majority of natural gas produced in Mozambique was exported (127 bcf) to South Africa via the 860-km Sasol Petroleum International Gas Pipeline, and the remainder was domestically consumed (27 bcf), according to the Oil and Gas Journal. Another main target for future LNG exports are in the Pacific Basin, where US Anadarko Petroleum has made 8 million tons per annum (mtpa) in off-take agreements, which is expected to propel Mozambique to vie with global leaders Qatar, Australia, and North America in the medium to long term, to meet rising global demand from the Chinese and Indian energy markets.

The country’s fifth oil and gas bid round, initially scheduled to accept bids until January 20th 2015, was extended by over three months until April 30th because of high levels of investor interest and requests from operators for more time. The licensing round unveiled 15 new onshore blocks for oil and gas explorations and production, which include three new areas of the northern Rovuma Basim where multi-billion development projects are already underway by Anadarko and Italian Eni. According to Reuters, initial investments in the country’s natural gas sector are expected to exceed $30 billion; to increase production capacity to 20 mtpa of LNG, with firsts exports planned to start in 2018.

Anadarko is leading the Rovuma Basin exploration in Area 1, where significant natural gas discoveries have been made, amounting to approximately 50-70tcf of recoverable gas reserves; Eni’s discoveries at the Rovuma Block are estimated to amount to more than 80tcf of recoverable gas resources in Area 4. In 2014, Anadarko had one active rig in Area 1, drilling the already discovered natural gas fields, while continuing exploration in their acreage. Anadarko’s President John W. Peffer told TBY that there is potential to drill more new wells in 2015 within their defined discovery areas, while the government recently approved Anadarko’s environmental impact assessment for the onshore and offshore portions of Area 1’s development. Mozambique’s ability to compete with Qatar, Australia, and North American is a result of the confluence of several factors, informs Peffer; high deliverability of the wells means fewer wells are required to produce a significant volume of natural gas, while gas fields are as close as 20-40km to shore, eliminating the need for long pipelines; high quality gas allows the country’s operators to use simpler pipelines and production facilities, needing less pre-preparation, which all reduces costs; this combined with the sheer scale of the project ensures the country’s competitive edge.

Because of the discoveries in Areas 1 and 4, LNG development of at least 50 mtpa is being considered. Eni and Anadarko aim to jointly plan and construct shared onshore LNG liquefaction facilities in the Cabo Delgado Province of Northern Mozambique, and the engineering design for the offshore projects and liquefaction facilities is nearing completion.

In addition to its gas reserves, major deposits of coal were recently discovered in the Tete province, with an estimated size of about 23 billion tons, which have attracted substantial foreign direct investment. Minas Moatize is also working with the government and stakeholders to improve railway logistic efficiency to increase competitiveness and improve economic results of the country’s coal industry. After the expansion of the project is complete, use of coal in the domestic energy market is expected to increase.


In order to meet the growing energy demand, Mozambique is also keen to develop their renewable energy resources. Solar energy investors are looking to fill a gap in the country’s rising energy demands, with solar energy usage already taking off in rural parts of the country due to projects by companies like Self Energy Mozambique. According to Mozambique’s Minister of Energy Salvador Namburete, household solar systems have already provided electricity to 3.7 million Mozambicans, helping to lift the country’s electrification rate from 7% in 2004 to 40% in 2014. In order the reach the remaining 60% of the population, Namburete has said that investments of a further $2.4 billion is required.

The country is also expanding implementation of its great hydroelectricity potential, turning to the international community for long-term investments to construct hydroelectric power plants. The country’s energy sector received the largest amount of investment in 2014 in projects through the Mozambique Investment Promotion Centre, attracting over $3.23 billion for just five projects, two of which were hydroelectric plants. The Lupata hydroelectric dam on the Zambezi River accounted for the largest single investment at $1.07 billion from Mauritas, who also invested in the Zambezi River Boroma hydroelectric plant at $572.5 million.

The Cahora Bassa dam hydroelectric plant (HCB) is among the largest hydropower installations in Africa, with a capacity to generate 2,015MW of electricity. After the first phase of recovery of the Songo substation was completed, energy production of HCB increased by 6.35% in 2014 to 15,892GWh. Construction of the dam began in 1969 when the contract was awarded to Zamco consortium, and Hidroeléctrica de Cahora Bassa, SARL was founded in 1975. The state took over the project in 2007 holding 85% of its shares, and as of 2014 now owns 100%. Another hydro dam, the Mphanda Nkuwa, is being planned to increase power availability in the country, to have annual generation of 8,600MW. Ncondezi Energy plans to bring online Mozambique’s first coal-fired power station (300MW) next to its coal mine in the Tete Province, aiming to commission the the power plant in 2H2017 and initiate commercial operations in 1H2018. The plan is to eventually expand the station to 1,800MW. Ncondezi Energy will use existing transmission capacity to send power to northern Mozambique.


The country’s domestic electricity challenges are marked by a growing gap between domestic demand and existing supply, exacerbated by the rapid growth in the upstream and extractive sectors. Coinciding with the establishment of Mozal and Mozall II aluminium smelters, energy consumption has skyrocketed since the late 1990—Mozal alone consumes 900MW of electricity, equivalent to an over 70% of HCB’s total power output, according to OECD. Transmission structure is also in need of development, as 80 to 90% of power from HCB reaches southern Mozambique by way of South African transmission lines. However, according to Standard Bank, LNG will add $39 billion to the Mozambican economy over the next 20 years, boosting GDP per capita from approximately $650 in 2013, to $4,500 by 2035, and further development of electrification is sure to follow. The government has already invested over $530 million in rural electrification over the past five years, and electrification rates are growing—10.2 million Mozambicans now have access to electricity compares to 1.3 million in 2004, ranking the country as having the third highest electrification rate in the Southern African Development Community region.

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