According to the International Energy Agency (IEA) 2021-2025: Rebound and beyond report, following a four percent drop in 2020, natural gas demand is expected to progressively recover in 2021, as consumption returns close to its pre-crisis levels in mature markets, Meanwhile, emerging markets will benefit from economic rebound and lower natural gas prices. As global demand gradually increases, and several large-scale natural projects come online, there lies a unique opportunity for Mozambique to establish itself as a major Liquified Natural Gas (LNG) exporter and competitor. Fueled by sizable gas discoveries of approximately 125 trillion cubic feet (tcf), Mozambique can leverage its strategic resources to become one of the top LNG exporters globally.
Serving International Markets
The IEA notes that the Asia-Pacific region will account for over half of incremental global gas consumption in the coming years, and although driven by the development of gas in China and India, this consumption presents a key opportunity for Mozambican LNG. Mozambique’s geographical position provides a direct link to the Asia-Pacific market, with an estimated seven-day travel time from Mozambique to India for an LNG cargo delivery. This direct link enables fast-paced delivery of LNG to growing markets in India and the surrounding region, and is a key driver of African gas development at large.
In the Mozambique: Turning a Crisis into an Opportunity webinar held on Wednesday and hosted by Mena Associates, Paul Eardley-Taylor, who is responsible for Standard Bank’s Oil & Gas sector coverage activities for Southern Africa, noted the opportunity for Mozambican LNG to contribute to India’s decarbonization initiatives. As the third-largest greenhouse gas emitter globally, India is focusing on reducing these emissions and transitioning to cleaner sources of fuel such as LNG. By directing exports to the Asia-Pacific market, Mozambique can not only address growing demand in the region, but also contribute towards a global energy transition and greenhouse gas reductions.
“Mozambican LNG has a role to play in decarbonizing India,” said Eardley-Taylor. “Mozambique is a force for good in creating clean energy and reducing the growth of CO2 emissions.”
Fostering Regional Integration
In addition to international market penetration, Mozambique is well-positioned to be a regional player through integration with other emerging East African LNG producers. Notably, growing markets in Tanzania, Zambia, Uganda and Rwanda present opportunities for Mozambique’s LNG projects, as pre-established infrastructure and inter-governmental support can drive regional fuel and power generation demand. With proven natural gas reserves of 57 tcf – of which at least 46.5 tcf are found offshore – Tanzania is spearheading the development of several key LNG projects, aiming to utilize its resources to fulfill local needs for industry, power generation, fertilizer and potential exports. By integrating projects with resources, Mozambique and Tanzania can bridge supply, benefit from direct access to growing regional markets, and utilize current and developing infrastructure to significantly reduce project costs for both countries.
“By increasing energy and economic linkages between Mozambique, Tanzania and Uganda, Mozambique can join together Tanzania’s resources with its own,” noted Eardley-Taylor. “Additionally, Tanzania already has a half-built coastal pipeline, which Mozambique can benefit from.”
Building Export Infrastructure
With the highest proven natural gas reserves in the region, Mozambique is well-positioned as a regional LNG producer and exporter. As many countries begin to realize the benefits of LNG as a cost-effective, transitionary and readily available resource, demand for LNG is growing steadily, along with proposals for linkages between Mozambican reserves and neighboring countries. Notably, South Africa is seeking the development of a cross-border pipeline – the African Renaissance Pipeline Project – which aims to connect Mozambique’s massive reserves with South Africa’s growing energy demand. The pipeline will offer a direct export link to South Africa, capitalizing on the country’s demand, as well as providing for the construction of sub-pipelines to branch off of the main one and connect to other countries, such as Zambia and Zimbabwe. By focusing on regional exports, Mozambique can boost economic development and industrialization, while fulfilling regional fuel needs.
Additionally, Mozambique is already a regional electricity exporter due to its Cahora Bassa Hydroelectric facility, and has the potential to increase electricity exports to surrounding countries, leveraging its sizable natural gas reserves through the development of gas-to-power. According to the Organization for Economic Co-operation and Development, sub-Saharan Africa has the lowest energy access rates globally, in which electricity only reaches about half of the population. With power generation needs on the rise – and countries such as Zimbabwe and South Africa experiencing electricity crises – Mozambique is well-equipped and positioned to address these needs through its natural gas and hydropower developments. Accordingly, the growth and export potential of Mozambican LNG is unparalleled, and the country is well on its way to transitioning into a global LNG player.