Mozambique Returns to World Stage

By Liesl Venter

In a feature story from Issue 5 of Breakbulk Magazine. South Africa-based reporter Liesl Venter speaks to industry experts about the exciting potential opportunities for breakbulk in Mozambique, home to one of the world’s largest natural gas infrastructure projects.
  

Mozambique is a meteoric rise in the project sector that no one can afford to ignore. The combined planned investment for phases 1 and 2 of the country’s three major liquefied natural gas projects alone exceeds a staggering US$100 billion, potentially making it the most significant investment in the world, second only to the international space station.

However, no one could be blamed for not taking this seriously. Many consider Mozambique’s developments a distant possibility, as the country faces significant challenges. Nevertheless, the unwavering interest and continuous investment endure unabated. Neither cyclones, corruption, sovereign debt, nor even ISIS have been able to impede the nation’s progress.

“Mozambique is the Terminator,” said Paul Eardley-Taylor, head of oil and gas, Southern Africa at Standard Bank. “It just cannot be killed.”

This comes while TotalEnergies still maintains its force majeure declaration at its most significant project in Mozambique, the Mozambique LNG Project, where an insurgency two years ago brought activity to a complete stop. Dozens of civilians were killed in Islamic State-linked attacks in the coastal Mozambique town of Palma in 2021, near the gas projects valued at more than US$60 billion.

Despite its massive gas reserves and potential, talk of transforming this African economy seemed to be precisely that as companies evacuated staff. After decades of civil war, the first glimmer of hope was fading fast as insurgents held the upper hand.

But then Southern Africa Development Community and Rwandan troops were brought into Cabo Delgado, the country’s northernmost province and home to its precious gas reserves, and over the past two years, the insurgents have steadily been moved back.

The soldiers have not come cheap though. The Rwandees alone cost around US$20 million a month if the rumors are to be believed. True or not, it gives insight into Mozambique’s importance to the oil and gas industry.

“Nothing is going to stop the gas development in Mozambique,” Eardley-Taylor said. “The question is, does the world need Mozambique’s gas, and the answer is yes. More so, Mozambique is in the perfect location. It is only nine days sailing to India, with a population of 1.4 billion. Then there is China, just as close and with a population of more than a billion. Both these countries have committed to net zero goals by 2060. Furthermore, Mozambique gas comes with a shallow CO2 footprint.”

At only 48 years old, Mozambique is comparatively young. It has governance issues, problems with debt, remoteness and poverty. That's in addition to the problems with terrorists.

But, despite it all, “Mozambique’s interest has not waned,” Eardley-Taylor said. “Just the opposite. It won’t happen overnight, but Mozambique will be one of the top five LNG-producing nations in the world within the next few years. No matter how one looks at Mozambique, nothing can stop it.”


Calm After the Storm

In Pemba and Palma, Mozambique’s two gas towns, life has returned to some form of normality after the drama of the past two years. While Total has not formally committed to when it will lift the force majeure, its commitment to Mozambique continues.

“Billions of dollars have been spent on Mozambique to date,” Eardley-Taylor said. “There is simply too much at stake in terms of investment already made and earnings to come just to walk away.”

Roelof van Tonder, director of market insight and development at Africa House, said that while fundamentally nothing has changed around the project and the developers are still saddled with the declared force majeure, a visit to Palma tells a different story. “Construction activity is definitely taking place on-site, and there are a number of developments going on,” he told Breakbulk.

Stakeholders close to the project have also confirmed that Total and its partners are in close discussion with companies awarded tenders for Mozambique LNG. “A lot has happened since those contracts were signed,” Van Tonder said.

“The world has had a pandemic, Russia has gone to war with Ukraine, and inflation is at an all-time high. Pricing will be a sore point at this stage, and it seems that the developers are trying to get a grip on costs before they lift the force majeure.”

This in itself is going to be a long and difficult process. Word on the ground is that all companies awarded contracts for the project have been asked to resubmit pricing schedules.

“If nothing else, the insurgency will have to be considered, and no company is going to operate in Mozambique without taking into account added security measures,” Van Tonder said. “While the immediate threat has been removed, there are still major risks to operating in this region. It is not an easy environment to operate in, and the risk must be factored into costs.”

Van Tonder believes that interest in Mozambique will only increase going forward. “We have yet to fully grasp both the scale of the gas resources and the size of the business and energy opportunities these discoveries present.”


Project Potential

Mozambique LNG was initially expected to deliver its first LNG cargo in 2024, with plans to produce up to 43 million tonnes of gas annually. The force majeure delayed the timeline of this project extensively. Indications now are that workers will return towards the end of this year with the project back up and running by early 2024. Plans for the approximately 65 trillion cubic feet of recoverable natural gas onshore plant could be commissioned as early as 2027.

The country’s second project, Rovuma LNG, introduces a whole new ball game – and project opportunity of its own. According to Eardley-Taylor, this project is expected to reach final investment decision by the end of 2024, possibly early 2025.

“The entire project has been redesigned to deliver even bigger output. So instead of two big trains being built, the project will now see 12 smaller trains developed. We are talking electric vehicles, blue hydrogen and space-age technology for a project that is being future-proofed.”

A study by Standard Bank on the Rovuma project indicates that once developed, the 15.2 million tonnes per annum project, expected to attract between US$27 billion and US$32 billion in investment, will monetize 2.6 billion cubic feet per day of Mozambique’s offshore LNG resources, and add US$15 billion to US$18 billion per annum to Mozambique’s gross domestic product.

These two projects alone will catapult Mozambique into a substantial gas producer domestically, regionally and internationally. But this is just the beginning.

“We expect to see in Mozambique at least five onshore projects reach FID between September this year and 2029,” Eardley-Taylor said.

The opportunity for project cargo operators is simply enormous, he added. Over and above what is happening, there is also Tanzania, whose gas is some 220 kilometers away. “Here are plans for a 15 million tons per annum modular plant with liquefaction. The FID target for this project is 2025. It brings massive financial and economic benefits to Tanzania.”

Philipp Buechler, managing director, Mozambique, Air and Sea at DSV, said that despite the difficulties experienced in Mozambique around the LNG gas projects over the past two years, project cargo volumes are already on the up.

“The project cargo potential is massive,” he said. “Not only around the two planned LNG projects but just the overall infrastructure development that is taking place in the country.”

Buechler said over the past two years, several renewable energy projects had taken off, and volumes had spiked for the solar plants. “There is talk of a wind project in the pipeline, while the extension and upgrade of the Cahora Bassa power station is also on the cards.”

In the Pemba area investors are also seeing increased potential in graphite mining and projects in this sector are on the up – so much so that some analysts predict that the country could also become one of the biggest graphite producers in the world.

Moving forward, Eardley-Taylor said, serious infrastructure projects would have to be part of the discussion to turn it all into a reality. “A bridge connecting Mozambique and Tanzania, for example, will be necessary to develop the gas potential of these two countries.”

Not to mention undertaking the necessary large-scale and ongoing investment in road infrastructure and ports if there is any chance of meeting project timelines.


Tackling the Challenges Head-On

Buechler said moving cargo in Mozambique is not impossible, but like most of Africa, it is not an easy operating environment. In Palma and Pemba, trucks are again moving, all with military convoys. “Activity is slowly but surely returning to the area. We are seeing more and more cargo movements, workers are back on the various sites, and quite a bit of construction is taking place.”

Operations in this part of the country are still highly dependent on security. Guards are still required, Buechler said, although the area has been declared safe to travel. “We keep in close contact with security companies that give us daily updates on the region. For the most part, safety and security have been restored, but there is still risk.”

He added that looking at the project development in the pipeline, project operators have some significant hurdles to jump if they are to deliver cargo to site in time.

“Road infrastructure in Mozambique is a big concern. Not only is it underdeveloped, but bridges have not been maintained, and moving any heavy cargo requires either bypasses or the propping of every bridge. This takes time, and it comes at a cost. Planning will be crucial in light of the number of projects we see taking off.”

Another concern is the availability of assets on the ground. “Admittedly, this is a good problem to have,” Buechler said, indicating that as the projects start to take off, concerns are growing that there will not be enough assets and equipment to cater to it all.

He said it is critical for logistics companies to involve themselves in discussions with stakeholders before any of these projects develop further.

“We will see every form of transport known to man used in Mozambique in the next few years to get all the cargo where it needs to be. There will be beach landings for cargo where there are no ports and we are going to have to find ways to move heavy equipment up and down treacherous landscapes, but at this stage, it is essential that a total needs assessment is done to coordinate all of this, or we are going to find ourselves in trouble delivering it all.”

He said the long-term potential for the logistics sector must be considered despite all the challenges. “At this stage, I think most operators in the country are reassigning their abilities to ensure they have the necessary skill and experience to service the project sector that will be booming within the next two years.”

Moving project cargo in Mozambique requires a local network, unlike in many other African countries. “You need to have a footprint in all the regions you are operational in,” Buechler advised. “It is impossible to work in the North from the country’s South. Nacala, for example, one of the main ports to service the gas projects, is an extremely complex port to operate in. Local presence is critical.”

In this part of the world, a lack of knowledge and experience equates to downtime, which is expensive.

However, “in the face of real adversity, Mozambique is probably one of the world’s most exciting project cargo spaces,” Buechler concluded.

And according to Africa House’s Van Tonder, it is difficult not to get excited when visiting Mozambique. “The potential is tangible. After everything that has happened the past two years, it is clear that people are gearing to go and that abandoning projects was never a consideration. Companies willing to take on the challenge are going to find benefit in the Mozambican project sector for years to come.”


Amanda Duhon, regional director at the Energy Industries Council, will present an “Industry Sector Review” on the main stage at Breakbulk Americas 2023 on September 27 from 12:00pm-12:20pm. The session will provide updates on the state of play across four key sectors for breakbulk – mining, oil and gas, renewables and manufacturing.

Check out the full main stage agenda at this year’s event, happening on 26-28 September at the George R. Brown Convention Center in Texas, Houston.