LNG in Mozambique: Resources Saviour or Curse?

11 July 2018 Liam Carmody, Research Assistant, Indian Ocean Research Programme


The eventual development of liquefied natural gas (LNG) projects in northern Mozambique is expected to move the country closer to becoming a global LNG player. Since the discovery of enormous natural gas fields off the coast of Mozambique in 2010, companies such as Anadarko Petroleum Corporation and Eni SpA have sought to advance the production of LNG.

In 2012, the discovery of the Coral Field, a gas field off the coast of Cabo Delgado Province, sparked the progression of a number of LNG projects in Mozambique. Working in conjunction with the Mozambican Government, the Italian oil giant Eni has begun developing a floating liquefied natural gas (FLNG) facility in Area 4 of the Rovuma Basin. Launched by President Felipe Nyusi on 1 June 2017, the US$8 billion ($10.8 billion) project is the first of its kind in Africa and will be able to liquefy more than 3.3 million tonnes of gas per year by the time it is operational in 2022.

Mozambique Gas Map


LNG projects such as Coral South FLNG have the potential to transform the economy and society of Mozambique. The reserves of the offshore Rovuma Basin, shared by Tanzania and Mozambique, could supply domestic demand for up to 5,000 years. With domestic reserves of up to 180 trillion cubic feet of gas, the development of such large-scale LNG projects has the potential to significantly boost the economy of one of the poorest countries in Africa.

The Empresa Nacional de Hidrocarbonetos (ENH) is the state-owned energy company responsible for commercialising gas reserves in Mozambique. ENH has at least a ten per cent stake in all LNG projects throughout Mozambique. Despite having to develop LNG infrastructure from scratch, the Mozambican Government expects to receive US$49.4 billion ($66.5 billion) in state revenue over the lifetime of various LNG projects, as a baseline scenario. With the first projects expected to start production in 2022, some analysts believe that Mozambique could eventually become the third-biggest LNG producer in the world, behind Qatar and Australia.

Shortages in supply and surging demand in Asia have perfectly coincided with the development of the LNG projects in Mozambique. Chinese demand for LNG has grown rapidly; by 46 per cent to 38.1 million tonnes in 2017. The increase in demand from China has been accompanied by surges from other Asian countries, such as Bangladesh, Pakistan and Sri Lanka, to the extent that it is likely to offset what had otherwise been expected to be an oversupply of LNG.

Given the increasingly crowded LNG market, Mozambique must minimise delays in developing its projects if it is to gain from the existing dynamics of the market. The slow progress in bringing the LNG projects online has so far done little, however, to improve its economic situation, particularly given that Mozambique defaulted on loans worth US$2 billion ($2.7 billion) in 2017.

Attacks carried out by the Ahlu Sunna wal Jama’a group could be another potential source of further delays. First emerging in Cabo Delgado Province in 2015, the group seeks to impose Islamic law in the region. Mainly consisting of jobless youths from poverty-stricken rural areas, Ahlu Sunna wal Jama’a carried out 20 attacks in the first four months of 2018 alone. The group poses a significant threat to the security of LNG projects in the area worth US$30 billion ($40.4 billion), as well as increasing the risk for investors. US-based company Anadarko was forced to evacuate staff from a LNG plant on the Afungi Peninsula, after a number of attacks recently killed 39 people. While the presence of the Islamist group may threaten the development of LNG projects in the north, the wealth created from projects in other areas could potentially exacerbate existing socio-economic inequities, further emboldening such groups in the future.

The development of the Mozambican LNG projects has also triggered fears over potential negative consequences from a resource boom. The “resource curse” refers to the paradox in which states with an abundance of natural resources fail to benefit fully from that wealth; instead often falling into poverty, conflict or corruption.

A boom in the growth of the LNG industry in Mozambique could have a number of negative outcomes. Revenues from LNG production could be embezzled or mismanaged; investment may be diverted from other areas of the economy; and the overall fate of the Mozambican economy may come to rest on volatile global LNG prices.

If the Mozambican Government does not concentrate its efforts on strengthening its institutions and diversifying the economy, the growth of the LNG sector may only further divide Mozambican society. With nearly 50 per cent of Mozambicans still living in poverty, more than 50 per cent of adults aged 20-30 unable to read and only eight per cent of rural households having access to electricity, the equitable distribution of LNG-derived income could have a significant effect on poverty reduction in Mozambique.[1]

If the wealth acquired from mining and natural resources is kept highly concentrated in élite circles, however, the development of the Mozambican LNG industry could have a divisive effect and further exacerbate the socio-economic inequalities.


[1] Lundell, M.R., ‘Picking up the Pace of Poverty Reduction in Mozambique’, World Bank, 21 December 2016.  https://www.worldbank.org/en/news/opinion/2016/12/21/picking-up-the-pace-of-poverty-reduction-in-mozambique

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