Mozambique: Gas developments to continue, but delays expected – analyst
The chief economist at consultancy firm Eaglestone said yesterday that the recent attacks in northern Mozambique do not jeopardise the investment by oil companies, but admitted that it generates apprehension and possible delays in gas exploration projects.
“The oil companies must have security guarantees and possibly the Mozambican authorities will need some international help, but a lot has been invested there, so the projects are not at risk, they may be delayed, and that is bad for all parties”, said Tiago Dionísio, speaking to Lusa news agency.
For the analyst, the delay in the development of projects for the extraction and export of liquefied natural gas “is worrying because the country needs gas revenues” to be able to support the increase in costs with sovereign debt installments, which will rise to 9% per year from 2024 onwards.
“As of 2024, interest rates on Eurobond [sovereign debt issuance] increase to 9% and this could put some risk on the country’s ability to pay its commitments,” said the analyst, referring to the increase in interest rates demanded by investors to transact the country’s debt.
“The increase in rates reflects some apprehension by investors about the capacity of the Mozambican authorities to be able to contain this escalation of insecurity in the region,” he explained.
The project, he pointed out, “must move forward as soon as possible, it is fundamental because Mozambique needs gas revenues and cannot run the risk of other potential buyers finding alternatives to the country”.
The Total project “is expected to generate revenues of around US$96B over the next 25 years, according to Government estimates, and this is very significant considering that the Gross Domestic Product of the country is around US$15B” concluded Tiago Dionísio.
The cost demanded by investors to transact Mozambican sovereign debt rose to 10.3%, the highest level since October, following the attacks in the north of the country, where Total’s megaproject is located, which goest to show the uncertainty around investments in the country’s great natural gas resources. This is the highest interest rate since October 5, according to Bloomberg.
The town of Palma, the capital of the district that houses the gas projects in northern Mozambique, was attacked on Wednesday by ‘jihadist’ insurgent groups that have been terrorizing the region for three and a half years.
Dozens of civilians, including seven people trying to flee the main hotel in Palma, in northern Mozambique, were killed by the armed group that attacked the village on Wednesday.
Violence is causing a humanitarian crisis with almost 700,000 displaced people and more than 2,000 deaths.
The Islamic State, through its official agency Amaq, released images of the village and have claimed to be behind the attacks.
Several countries have offered military support in the field to Maputo to fight these insurgents, whose actions have already been claimed by the self-proclaimed Islamic State, but, so far, there has not yet been an opening for this, although there are reports and testimonies that point to the existence of security companies and mercenaries in the area.