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Unit 2 Macro: The Dash for Gas in Mozambique

Friday, February 17, 2012
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In the last twelve months two huge discoveries of natural gas have been made in the East African country of Mozambique. The latest - a deepwater discovery - is said to hold over 210 billion cubic metres of natural gas and investment in exploiting the field could be the major cataylst for a rapid phase of growth and development for one of the world’s poorest countries. The country has large untapped oil, coal and titanium reserves in addition to the gas. According to the UK Trade and Investment body, within 15 years Mozambique could be Africa’s second largest coal producer (after South Africa) and one of the largest coal exporters in the world.

Can it benefit in a sustainable way from exporting these resources or will they prove to be a curse on development?

For many years Mozambique has been afflicted by a brutal civil war which ended in 1992 and then a series of natural disasters including floods in 2001 and 2001 which destroyed much of its infrastructure.Floods were replaced by a calamitous drought in 2002 but more recently the economy has achieved strong growth and progress in lifting people out of absolute poverty. That said, 50% of Mozambicans living on less than $1 a day, foreign aid accounts for nearly half of government spending and there remain severe doubts about whether the dividends of an export-boom in natural resources will feed through the the majority of the population.

The Mozambique government has a 10% stake in the newly-discovered gas fields, it sold a licence to the Italian company Eni to explore for new gas reserves and Eni has committed to building a multibillion-dollar liquefied natural gas terminal in the country as a distribution platform to export mainly to fast-growing Asian economies.

Other transnational companies are investing in Mozambique. Vale, a Brazilian multinational is spending over $3 billion to rebuild and extend the 425 mile Nacala railway and connect it to a deep water port so that Mozambiquan coal can be exported.

Putting the infrastructure in place will take several years and gas production on a huge scale may not start before 2016. Although new industries brings risks as well as opportunities, the potential for a step change in development in the country is enormous.

Progress in raising per capita incomes

Data from Timetric.

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World Bank from Timetric

Exports as a share of GDP and debt interest payments as a percentage of export values

Data from Timetric.

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World Bank from Timetric

Video Resources: Doubts over equality in Mozambique’s coal boom

 

Riots over food price hikes in Mozambique

 

Poverty at $2 a day (PPP)

Data from Timetric.

To view this graph, please install Adobe Flash Player.

World Bank from Timetric

 

 



 

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