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Mozambique's Potential to Become the Qatar of Africa

Offshore natural gas discoveries made in Mozambique since 2010 have propelled the country as a new investment destination in sub-Saharan Africa. By exploiting these resources, Mozambique could become the third-largest exporter of liquefied natural gas in the next decade. However, conditions need to be met before this change can happen and benefit the entire Mozambican population, thus avoiding the resource curse that countries such as Angola and the Democratic Republic of Congo fell into. This research seeks to understand the current economic and legislative environment relating to the Mozambican gas industry and to analyse the investment opportunities that are expected to arise along the gas upstream, midstream, and downstream value chain.

Key Findings
- As of early 2015, Mozambique was estimated to be endowed with more than trillion cubic feet (Tcf) of recoverable natural gas resources, following recent major offshore discoveries made in the Rovuma Basin, close to the border with Tanzania. This is propelling the country into the top countries in Africa for gas reserves with Nigeria and Algeria.
- Sasol Limited (Sasol) started producing natural gas in Mozambique in 2004 from its Pande and Temane gas fields, located south of Beira. In 2014, natural gas net production amounted to billion cubic feet (Bcf), of which, % was exported to South Africa.
- If the significant Rovuma Basin gas resources start being developed, exploration and production (E&P) companies foresee that Mozambique could become the third-largest
exporter of liquefied natural gas (LNG) globally within the next decade.
- There is also a potential to create a domestic gas market which could benefit many sectors of the economy as well as the residential sector. This will require the implementation of anchor projects to justify the high expenses of building gas transportation infrastructure.
- These new resources are expected to be a game changer for Mozambique with the potential to export natural gas, not only to South Africa, but also globally—to Asia and Europe—when the LNG export terminal and/or floating LNG (FLNG) vessels become operational.
- However, a few conditions need to be met before this change can happen to benefit the entire population, thereby avoiding the resource curse that some countries, such as Angola and the Democratic Republic of Congo, have fallen into.
- One of the conditions entails resolving the political instability which re-emerged in 2013 between Frelimo, the ruling party, and Renamo, the former rebel group and main opposition party.
o Some industry stakeholders are convinced that this should not be an obstacle for the development of the gas industry, and rather think that perceptions about political instability and its related risks must change within the international community.
- Rampant corruption will also have to be curbed in order to avoid increasing wealth inequality and to ensure that the entire population benefits from the large unexploited gas reserves.
- The country’s basic transport and energy infrastructure remains largely underdeveloped. Addressing this challenge is paramount to help the country’s economy grow and diversify into more value-added sectors.
- A stable and transparent legislative framework is essential to attract investors in the country’s gas sector. The Government of Mozambique (GoM) made progress on the matter in 2014 by developing the following policy and legislation:
o Gas Master Plan (GMP), published in June 2014.
o Revised Petroleum Law (No. 21/2014), published in August 2014.
o Special Regime Decree (No. 2/2014), published in December 2014, with specific terms and conditions for the development of an LNG project relating to natural gas discoveries made in Areas 1 and 4 of the Rovuma Basin.

Table Of Contents

Mozambican Gas Sector: Major Opportunities Across Multiple Industries
1. EXECUTIVE SUMMARY

Executive Summary
Key Findings

2. MACROECONOMIC CONTEXT

Macroeconomic Context
Mozambique GDP Growth Outpacing Rest of the World
GDP Composition
Extractive Industries to Support Future GDP Growth

3. LEGISLATIVE FRAMEWORK

Legislative Framework
Regulatory Structure—Key Stakeholders
Revised 2014 Petroleum Law
2014 Special Regime Decree—LNG Project Areas 1 and 4
Oil and Gas Legislation

4. DRIVERS AND RESTRAINTS

Drivers and Restraints
Gas Industry Drivers
Gas Industry Restraints
Additional Comments

5. UPSTREAM OPPORTUNITIES

Upstream Opportunities
Large Offshore Gas Finds in the Rovuma Basin
Mozambique Significant Gas Resources in Top 15 Globally
180+ Tcf of Recoverable Gas Resources in Areas 1 and 4
End User Targets for Mozambican LNG
Rovuma Basin Gas Fields
Close-Up Offshore Gas Discoveries in Areas 1 and 4
Fifth Licensing Round

6. MIDSTREAM OPPORTUNITIES

Midstream Opportunities
Existing Gas Infrastructure
Existing Gas Infrastructure—Transmission and Distribution
Existing Gas Infrastructure—Distribution
Existing Gas Infrastructure—Pipelines and CPF
Future Gas Infrastructure—Onshore LNG
Future Gas Infrastructure—Offshore FLNG
Future Gas Infrastructure—Transmission Pipelines
Future Gas Infrastructure—CPFs and Other Projects
Future Gas Infrastructure—Palma LNG Project
Mozambique-Tanzania Link—Ally or Enemy?

7. DOWNSTREAM OPPORTUNITIES

Downstream Opportunities
Historical Natural Gas Production
Gas Master Plan—Gas Monetisation Strategy
End-user Analysis
End-user Diversification—Maputo
Power Sector—Existing Power Plants
Downstream Anchor Projects—Future Gas Power Plants
Downstream Anchor Projects—Other Future Power Plants
Downstream Anchor Projects—Future Power Plants Map
Downstream Anchor Projects—LPG, GTL, Fertiliser, Methanol

8. CONCLUSIONS

Conclusions
Gas Master Plan—Scenario Development
Gas Master Plan—Scenario Development Map
Direct Associated Infrastructure Opportunities
Investment Opportunities Across the Value Chain
Legal Disclaimer

9. APPENDIX

Appendix
List of Acronyms

10. THE FROST and SULLIVAN STORY

The Frost and Sullivan Story
Value Proposition: Future of Your Company and Career
Global Perspective
Industry Convergence
360º Research Perspective
Implementation Excellence
Our Blue Ocean Strategy

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