Mozambique: ExxonMobil will only decide in investment in two years – Fitch

The consultancy Fitch Solutions on Thursday said that insecurity in northern Mozambique would lead US oil company ExxonMobil to delay the Final Investment Decision (FID) until 2023, hindering the country’s economic growth.

“Due to persistent militant activity and uncertainty regarding project financing, we are sceptical about ExxonMobil’s Rovuma LNG project starting to bear fruit in the near term, and consequently do not foresee an FID until 2023, with risks trending to the downside,” the analysts said.

In a commentary on the insecurity situation in Cabo Delgado province, sent to clients and to which Lusa had access, the analysts of this consultancy owned by the same owners of the Fitch Ratings agency noted that despite the insurgency in the country continues to threaten the development of the liquefied natural gas sector, the three projects planned for the country should come on stream, despite the risks.

On Total’s project, a €20 billion investment near Palma, the town attacked on 24 March, Fitch Solutions expects the French oil company to resume construction as soon as possible but warns that this Area 1 project suffers from increasing risks against initial deadlines if demobilisation is prolonged.

Still, the consultants believe that the projects will go ahead, anticipating an acceleration of economic growth from next year, linked to the operation of the offshore structure operated by Eni, which will make gas exports rise to 1.3 billion cubic metres in 2022 and 4.6 billion cubic metres the following year.

“Consequently, Mozambique is expected to have among the highest growth rates in sub-Saharan Africa, with expansions of 5.2% and 7.7% in 2022 and 2023,” the analysts pointed out.

Commenting on the latest developments in Cabo Delgado province, Fitch Solutions also said that the long-term security outlook depended on the government’s response.

“The spread and frequency of attacks suggest that the conflict is becoming increasingly sophisticated and moves away from what Mozambique is capable of resolving alone,” they pointed out, noting that without regional and external security assistance, along with long-term efforts to increase inclusive development and support to affected communities, halting radicalisation, terrorist threats are unlikely to fade in the short term.

Armed groups have terrorised Cabo Delgado since 2017, with some attacks claimed by the jihadist group Islamic State, in a wave of violence that has led to more than 2,500 deaths according to the ACLED conflict registration project, and 714,000 displaced people, according to the Mozambican government.

The most recent attack was on 24 March against the town of Palma, causing dozens of deaths and wounded in a still ongoing assessment.

The Mozambican authorities regained control of the town, but the attack led oil company Total to abandon indefinitely the site of the gas project scheduled to start production in 2024 and on which many of Mozambique’s economic growth expectations for the next decade are anchored.