Mozambique, Africa’s New Gas Princess

Mozambique, Africa’s New Gas Princess

By

Bello Salihu, PhD

Gas, it is said, is the choice hydrocarbon of the new age. Not only is it much easier to transport but it burns more cleanly than oil thereby harming the environment less. So the excitement across the world about gas finds in Africa, a continent which, due to its very low per capita energy consumption, is more likely to export rather than consume it, is understandable. Africa’s proximity to Europe also means that, at last, Russia’s position as the gas cylinder of Europe could be threatened in a way that the gas productions of Algeria  and Nigeria which are tied to long term LNG supply contracts could not do. The Maghreb-Europe Gas (MEG) pipeline which links Algeria to Spain (through Morocco) and the Greenstream Pipeline, also known as Libyan Gas Transmission System (LGTS), laid across the Mediterranean sea, which transports gas from Libya to Italy all terminate in European countries that, due to the current state of their economies, are themselves hungry for cheap energy. 

So when it hit the global headlines for the very first time, Anadarko’s massive gas find off the coast of Mozambique last year commanded to be taken seriously. Anadarko’s CEO, Al Walker, promptly told the world that it could be the biggest gas find in the last ten years anywhere in the world. As of last month, with the new huge discoveries from the Atun and Golfinho wells in Offshore Area 1 where Anadarko’s operates in the country’s Rovuma Basin, the total estimated gas in place in the basin was about 100 Trillion Cubic Feet (TCF) with about 60 TCF recoverable. That is about 35% of Nigeria’s proven gas reserves, all discovered within a span of 14 months in just two fields. Anadarko is building an LNG liquefaction plant in Mozambique that plans to start exporting in about a decade.

The recent gas finds off the Indian Ocean coast of southern Africa has got many energy analysts excited. Just last month Italy’s ENI, reported substantial gas finds- also in Mozambique. ENI’s find is located in Offshore Area 4 of the Mamba Exploration Prospect and is estimated to hold between 7 to 10 TCF of gas.

All of a sudden a scramble is on to find as much hydrocarbon as can be found in the southern and eastern tips of Africa, from the horn all the way to Madagascar and every country and geological prospect in between. Kenya and war-torn Somalia are at loggerheads over their maritime border where another massive gas or oil find is expected. UK companies, Heritage and Tullow (of Ghana’s Jubilee Field fame) are in partnership in the exploration going on in the Lake Albert Rift basin which is estimated to hold nearly one billion barrels of oil. In fact, they have already hit oil in the Ugandan sector of the basin and plan to extend their exploration into the Kenyan part of the basin.

Kenya, the economic giant of eastern Africa is planning to upgrade its ports and build a new oil export terminal on the Lamu Archipelago on the east African coast.

A few weeks after heralding the British Gas (BG) huge gas discovery offshore Tanzania, Norway’s Statoil announced a gas find of over a Billion Barrel of Oil Equivalent (BOE) off the coast of the same country.

It is very likely that, going by the current energy demand pattern of the world, that this new energy hub will supply the seemingly insatiable thirst of the Asia Pacific region, particularly the two rising economic powers, India and China. Two Indian companies, Bharat PetroResources Limited and VideoCon Limited both have a ten percent stake in Anadarko’s finds in Mozambique. As stated by the CEO of Videocon in an interview with India’s CNBC-TV18 in 2011, their aim is to import the Mozambique gas into India.

Quite interestingly, apart from a small holding in an onshore field in Kenya operated by Tullow, China’s finger prints are not seen in the East and South African energy grab. It is definitely not because China does not need the hydrocarbons as their energy demand has been on the upward trend for the last two decades with no sign of letting off. So it is either they are bidding their time or they have chosen to limit their concentration in East Africa to solid minerals. But, of course, if the discoveries continue at this ferocious pace China will be all over onshore and offshore eastern and southern Africa like an octopus.

A country of just over 22 million inhabitants, Mozambique lies on the eastern banks of the Indian Ocean directly opposite the island nation of Madagascar. The former Portuguese colony became independent in June 1975 after a debilitating 10-year armed struggle for independence led by Front for the Liberation of Mozambique (Frelimo) that consumed generations. After independence, the new nation was then plagued by renewed violence in a civil war that lasted seven years between the post-independence government and rebel forces sponsored by apartheid South Africa under the name Mozambican National Resistance (Renamo). It is estimated that over a million lives were lost, nearly two million people became refugees dispersed into neighbouring countries and several millions were internally displaced during the civil war.

With these discoveries, the country is now firmly placed in the league of African energy producers. As we have mentioned oftentimes in this column, they are now at a crossroad where they will have to choose either to use their newly-found wealth to rebuild their nation or allow it to drag them further down to the path of renewed anarchy. Hydrocarbon resources have a way of testing governments and rulers with unbelievable wealth and power. Few nations in the world have succeeded in passing that test. For Mozambique the test is just one question, how do they translate all these discoveries and attention into sustainable national development through technology transfer, skills acquisition and jobs?

Mozambique is indeed Africa’s new gas princess. There is and will be a long line of suitors all ready to woo and court her. It is also not far-fetched to think that some other country or region may soon attempt to snatch that position from Mozambique. But while this rate of discovery continues, Mozambique will continue to attract attention and with such attention, even more discoveries and infrastructure. 

Meanwhile, from the experience of eastern and western European nations in the hands of Russian government and Russia’s Gazprom, everyone now knows that gas is more than an economic phenomenon. It is also, in more canny hands, a potent diplomatic tool.

But phenomenal as the scale of the finds in Mozambique are, the crown is still perched pretty on the head of the queen of African gas, Nigeria. What makes Nigeria’s position even more phenomenal than Mozambique’s is that no part of the 187 TCF of Nigeria’s reserves was found as a consequence of directly and deliberately exploring for gas. All of Nigeria’s massive gas reserves were found as a consequence of oil exploration and as a by-product of oil production. One wonders if the African queen of gas will take the global crown if an active gas exploration campaign is waged. Or if her wasting gas flares are capped and the gas diverted for internal use or export. But, alas, one will only but continue to wonder until that happens.

This was earlier published in my column 'Oil and Gas Weekly' in Government, 

a publication of Leadership Newspapers, Nigeria - 2012.