Africa Oil & Power spoke with Florival Mucave, Executive Chairman of the Mozambique Oil & Gas Chamber, about the potential of Mozambican resources to alleviate poverty while mitigating climate change and spurring country-wide industrialization.
Earlier this year, Mozambique hit a major milestone in the development of its oil and gas industry by securing the largest Foreign Direct Investment (FDI) in Africa to date. Despite a global slowdown of investment and ongoing economic instability as a result of COVID-19, the Total-operated Mozambique Liquified Natural Gas (LNG) development in Rovuma Area 1 locked in approximately $16 billion in senior debt financing, earning the gas-rich country the reputation as a force to be reckoned with on the global energy stage. Through domestic utilization of natural gas resources – and with a key focus on industrialization and poverty alleviation – the Mozambique Oil & Gas Chamber, among other key financial and development institutions, aims to harness the country’s resource wealth to drive private-sector and local participation within the industry.
A Pathway Forward
Mozambique has experienced several significant impacts as a result of the COVID-19 pandemic, including workforce dispersion and delays to project development and Final Investment Decisions (FID). Specifically, the country was expecting the announcement of ExxonMobil’s FID for the Rovuma LNG Area 4 project, however, the decision has since been delayed to 2021. Additionally, COVID-19 has caused operational delays through international travel restrictions and local workforce dispersion, with expatriate workers restricted from re-entering the country, in conjunction with local COVID-19 infection rates.
In response to these disruptions, the Mozambique Oil & Gas Chamber has initiated a pathway forward for the development and exploitation of natural resources within the country. By generating long term strategies that seek to prioritize inclusion and ensure future stability, the Chamber aims to leverage the country’s resources in collaboration with regional and international partners. Because Mozambique is seeking to monetize its natural resources significantly later than more mature African oil and gas producers, the country holds the unique opportunity to draw upon sustainability “best practices” from other markets.
“There is a whole body of information that we can learn from,” says Florival Mucave, Executive Chairman, Mozambique Oil & Gas Chamber. “We can assess the pitfalls of other African countries and avoid them.” Local Participation Mozambique’s vast natural resources can enable the country to not only benefit from export revenues generated, but also initiate a ripple effect concerning industrialization and local participation.
As a low-income economy with a high degree of poverty, Mozambique must utilize its oil and gas sector to spur industrial growth, create employment opportunities and stimulate economic development. By ensuring the domestic use of natural gas, secondary industry can be achieved. According to Mucave, this will help establish an environment in which the country can benefit from long-term industrialization beyond short-term existing resources.
“By using a percentage of the Mozambican gas domestically, we can develop secondary industries to the LNG industry,” says Mucave. “Therefore, we can create more jobs, further industrializing the country and continuing with economic development far after the time frame of these resources. Our objective is to outlive these resources.”
Moreover, the Mozambique Oil & Gas Chamber is focusing on local participation, in which collaboration between indigenous companies and the government has resulted in the development of strategies that seek to utilize resources to their maximum potential. The effects of these strategies are two-fold: firstly, the inclusion of the local workforce and industry creates a business environment conducive to investment. This is particularly relevant in the context of COVID-19, and could be a major factor in sustaining Mozambique’s ability to attract impressive volumes of
FDI. Secondly, these strategies prioritize local economic development, in which poverty alleviation can be achieved.
“One of the biggest challenges for Mozambique is that we are a poor country,” says Mucave. “The concept of the ‘resource curse’ is a reality to us. One of the main objectives of the Chamber is to include the participation of Mozambicans and Mozambican companies.”
By prioritizing inclusion, Mozambique has the potential to spur job creation and industrial development, establishing increased employment opportunities that could raise living standards across local populations.
One of the major challenges affecting the development of the Mozambican oil and gas industry is the issue of climate change versus economic benefit. As a low-income country, the economic opportunities that the development of the hydrocarbon industry can offer are too substantial to pass up, with key benefits including job creation and economic diversification, among others. However, several international environmental agencies have described the development of the Mozambican gas industry as being counter to climate change and carbon reduction objectives.
The Mozambique Oil & Gas Chamber, however, views economic development and environmental protection as complementary in its strategy to develop the industry. “We do not view these objectives as mutually exclusive, but rather complementary,” says Mucave. “Mozambique can exploit these natural reserves in a responsible and sustainable manner, using the resources for poverty alleviation while assessing our role in fighting climate change. Mozambique has suffered immensely due to climate change, and by finding a balance between the two, we can realize the benefits of the industry.”