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Capital Economics: “Mozambique May Have to Restructure Debt if Gas Revenues Don’t Increase Quickly”

Capital Economics: “Mozambique May Have to Restructure Debt if Gas Revenues Don’t Increase Quickly”

London-based independent economic research firm Capital Economics said on Monday, October 30, that Mozambique may have to restructure its debt if revenues from Liquefied Natural Gas (LNG) do not increase quickly.

“TotalEnergies’ announcement about the resumption of work is extremely important for Mozambique’s gas ambitions and public finances, as further delays would be a negative development because of the country’s high level of public debt,” explained British analyst David Omojomolo, speaking to Lusa.

The source added that “with debt payments increasing from 2024, a restructuring seems inevitable if gas revenues don’t increase quickly”, stressing that “the risks of a default are likely to remain high”.

For Capital Economics, the return of the French oil company to the north of the country “is good news, despite the fact that the start of production and export of natural gas is delayed until 2028, precisely the time when the cost of debt rises the most”.

The comments follow the restructuring of the debt of Empresa Moçambicana de Atum (EMATUM), which was converted into public debt following the hidden debt scandal in 2020, and which has already undergone a change in terms, postponing the start of payments in exchange for a higher interest rate.

Mozambique has three development projects approved to exploit the natural gas reserves in the Rovuma basin, which are classified among the largest in the world and are located off the coast of Cabo Delgado province.

Two of these projects are larger and involve channeling the gas from the seabed to land, cooling it in a factory and then exporting it by sea in a liquid state.

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One is led by TotalEnergies (Area 1 consortium) and work progressed until it was suspended indefinitely after the armed attack on Palma in March 2021, when the French energy company declared that it would only resume work when the area was safe. The other is the still unannounced investment led by ExxonMobil and Eni (Area 4 consortium).

A third completed and smaller project also belongs to the Area 4 consortium and consists of a floating platform for capturing and processing gas for export, directly at sea, which started up in November 2022.

The floating platform is expected to produce 3.4 mtpa (million tons per year) of liquefied natural gas, Area 1 aims for 13.12 mtpa and the onshore plan for Area 4 foresees 15 mtpa.

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