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Vast Oil Find Puts Mozambique on the Verge of Riches or Failure

In 2010, Mozambique, the former Portuguese colony on Africa’s southeastern coast make a discovery of natural gas deposits in the Rovuma basin, below offshore deep waters just off the country’s 2,470km Indian Ocean coastline, by United States energy company Anadarko, which attracted the attention of global capital. Also in 2011, the Italian energy company ENI SpA discovered an immense gas field in the area.

Mozambique is Africa’s third-largest holder of proven natural gas reserves after Nigeria and Algeria, in that order. Those reserves are enough to supply Germany, the UK, France and Italy for nearly two decades, but production is likely to start only five years or more after the final investment decision.

The discovery could transform one of the poorest countries on the planet into a leading exporter of liquefied natural gas (LNG), estimated at 5,000 billion cubic metres. The gas reserves are located in the northern province of Cabo Delgado.

The indirect influence of foreign capital

In March 2016, ExxonMobil purchased a 25 % interest in Mozambique’s LNG Area 4 from ENI for a reported US$2. 8 billion. In 2018, the World Bank funded a $2.4 million “contract for LNG Transaction Assistance for Area 1 and Area 4” involving a group of consultants, including ExxonMobil’s favoured law firm Hunton Andrews Kurth. During this same period – from 2016 to 2018 – ExxonMobil paid the law firm $500,000 in lobbying fees in the US.

In addition, in 2014 the World Bank’s $110 million budget support to Mozambique required the government to approve a new petroleum tax law. The new tax law includes, among others, value added tax or VAT exemptions and accelerated rates of depreciation for oil and gas exploration. These measures may significantly reduce the effective tax rates for companies involved in developing LNG Areas 1 and 4 among others. It is difficult, if not impossible, for the public to track how much government revenue is foregone due to such tax breaks.

Link between the presence of multinational corporations and the lethal conflict playing out

Despite the investment of billions of US dollars into various gas projects in Cabo Delgado by multinational corporations such as French oil company Total, the United State’s EXIM Bank, ExxonMobil, BP and Shell in Mozambique.

Unfortunately, Cabo Delgado region which is now playing host to a spate of violence pitting government forces against internal rebels known as RENAMO and insurgents claiming links to ISIS for the last two and a half years.

The United Nations estimated in May that the attacks had displaced at least 210,000 people. With the recent attacks, the number of displaced people may have reached more than 250,000, according to aid organisations working locally.

The war culminated in the seizure of the two towns by insurgents, Mocimboa da Praia and Quissanga, in March this year. The increased scale of attacks against state military facilities and government buildings is a mirror of the complex nature of the conflict pitting government forces against the insurgents.

This violent orgy began in October 2017 but, despite early warning signals about terrorism in Mozambique from the African Union (AU) in February, the Southern African Development Community (SADC) finally acknowledged the existence of a real crisis at its Extraordinary Summit on the 19th of May 2020.

Mounting evidence points to the fact that the discovery of gas fields by foreign multinationals and subsequent pouring in of billions of dollars worth of investment could be a factor in the brutal war that has broken out in the Cabo Delgado province. Multinational corporations, terrorist extremists and the government of Mozambique are seeking to cash in on the discoveries, regardless of the socio-political costs.

The gas projects currently under development “could release as much as the equivalent of seven times France’s annual greenhouse gas emissions, and 49 times Mozambique’s current national annual emissions,” a report noted.

According to a report in June, Roman Catholic Bishop of Pemba Luiz Fernando Lisboa spoke out against the destruction of local people’s history and culture because of this conflict, adding that it increasingly looks as if Cabo Delgado province is being divided and parceled out to big multinational companies.

Friends of the Earth, a London-based organization, recently accuses France of “helping ignite tensions in Cabo Delgado province by supporting multinational gas companies and the militarization of the zone.”

Local populations in the province, who have not benefited from the gas discoveries, feel that the thousands of government troops deployed are there only to protect the interests of foreign firms rather than citizens. Earlier this year, more soldiers were deployed into the province specifically at the request of Exxonmobil and Total, who feared for their investments.

The Mozambican government has responded in a very militarised and heavy-handed manner, in a province with locals who feel that they have been sidelined in national development programs.

The Cabo Delgado province was once the core of the Mozambican national liberation struggle against Portuguese colonial rule. It became the cornerstone for the spread of socialism as a national political ideology. Now, it is a hotspot of outlandish activities.

However, the consolidation of peace and the use of political means to resolve conflicts, particularly in the relationship between the two major political parties, is remarkable. The consolidation of the peace process will be a great contribution to strengthen the country’s competitiveness, which will go a long way to stimulating a few key sectors of Mozambique’s economy.

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