In a recent analysis released this Monday, 30 October, Capital Economics, a prestigious economic research firm based in London, warned of the possibility that Mozambique may have to restructure its debt if revenue from Liquefied Natural Gas (LNG) does not show a significant and immediate increase.
David Omojomolo, a British analyst at Capital Economics, highlighted the crucial importance of the announcement by TotalEnergies about the resumption of work in the north of the country. This development is seen as vital to Mozambique's gas aspirations and to the stability of public finances, given that any further delays could have negative repercussions, in view of the heavy public debt burden the country faces.
The analyst further stressed that, with debt payments due to rise in 2024, a debt restructuring appears to be an inevitable scenario unless there is a rapid increase in gas revenue. Ojomolo also warned that the risks of default remain high.
The resumption of operations by TotalEnergies is viewed favourably by Capital Economics, even though the delay in the works has rescheduled the start of natural gas production and export to 2028, precisely when debt costs are expected to peak.
These observations come in the context of the restructuring of the debt of the Mozambican Tuna Company (EMATUM), which was converted into public debt following the hidden debts scandal in 2020. EMATUM has already undergone a change in the terms of its financing, which postponed the start of payments in exchange for a higher interest rate.
Mozambique currently has three approved development projects for the exploitation of the vast natural gas reserves located in the Rovuma basin, off the coast of Cabo Delgado province. Two of these projects are very large and involve piping the gas from the seabed to the surface, where it will be cooled at a plant before being exported by sea in liquid form.
The project led by TotalEnergies (the Area 1 consortium) had already advanced significantly before the indefinite suspension of work, which took place after the armed attack on Palma in March 2021. TotalEnergies said at the time that it would only resume work when security in the region was assured. The other major project, led by ExxonMobil and Eni (the Area 4 consortium), has no announced date yet for the start of operations.
A third, smaller project, also belonging to the Area 4 consortium, has already been completed. It is a floating platform for gas capture and processing for direct export at sea, which came into operation in November 2022. This platform is expected to produce 3.4 million tonnes per annum (mtpa) of liquefied natural gas, while Area 1 has a planned capacity of 13.12 mtpa and the Area 4 onshore project is expected to reach 15 mtpa.
