Mozambique moots a sovereign wealth fund from lucrative gas investments

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Mozambique expects to earn as much as $96 billion from its gas projects

MAPUTO  – Mozambique is proposing a sovereign wealth fund on the back of the earnings it expects from its lucrative gas projects. The gas rich nation expects to earn as much $96 billion from its gas projects which are touted as the biggest private investments yet in Africa. French fossil fuel giant Total is among the companies invested in Mozambique’s liquefied natural gas projects. The projects will see the Southern African nation earn revenue six times the size of it’s current GDP over the lifetime of the projects.

The Mozambican central bank outlined plans on how the proposed sovereign wealth fund should function, and which institutions it will report to. The central bank’s plan proposes that during the first 2 decades, 50% of all government revenue from from the projects goes towards the fund and the remainder goes into the national budget. After that, 80% of the gas earnings go into the sovereign wealth fund. An independent audit company is to be appointed to audit the fund annually, and the central bank to provide quarterly updates of the fund’s performance in parliament. The state may withdraw 4% of the previous year’s income from the fund if the government revenue from natural resources is less 10% of what’s budgeted for.

It’s estimated that Mozambique may contain around 270 trillion cubic feet of natural gas. This if confirmed would make Mozambique’s gas deposits the largest in Africa. Other main investors involved in the projects besides the French oil and gas company Total are, American Anadarko Petroleum Corporation, and Italian oil and gas corporation ENI. There have also been further investors from Europe, China, Brazil, India, Japan and Australia, who joined in later on with further investments pledged.

Mozambique plans to start extracting the gas preserves in 2023, expecting a total of $25 billion in investments to explore LNG in the Rovuma Basin.

To see these projects reach their full potential, the government would need to ensure they deal with the security problems bedeviling the country. Islamic State linked violence has been escalating in the northern Cabo Delgado province with communities in the area under siege, and hundreds perishing as a result of the insurgences. In August the militants seized the port town of Mocimboa da Praia – about 60 kilometres south of where Total is spending $20 billion on its project. The government and Total recently signed an MOU that provides a Joint Task Force to ensure the security of Total’s investments in Mozambique.

The final proposal of the sovereign wealth fund will be sent to the public for scrutiny and public comments. The central bank seeks to have the the fund set up by the time production starts by 2022.

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