A Sign of Life From Mozambique’s Energy Sector

Low oil prices and a weak global economy have thrown a wrench in many countries’ plans to develop and exploit their untouched energy resources. But for Mozambique, those plans may be back on the table.On March 1, an energy consortium signed a cooperation agreement to construct a pipeline that will stretch from Mozambique’s massive offshore natural gas fields to northern South Africa. Though the deal is just an early step toward the pipeline’s actual completion, it could be a sign of progress to come for both countries’ energy sectors.The consortium responsible for building the pipeline comprises Mozambique’s Empresa Nacional de Hidrocarbonetos (ENH), South Africa’s SacOil, the Netherlands’ Profin and the China Petroleum Pipeline Bureau. In their agreement, which builds on an initial deal struck in December 2014, the four companies committed to the funding needed to complete the project’s pre-investment and engineering studies, as well as the pipeline’s construction and operation. According to project estimates, the 2,600-kilometer (1,600-mile) pipeline will cost approximately $6 billion.The China Petroleum Pipeline Bureau will shoulder 70 percent of that total cost by securing funds from Chinese financial institutions. For the state-owned China National Petroleum Corp., of which the China Petroleum Pipeline Bureau is a subsidiary, the pipeline is an opportunity for the company to increase its profits from its energy assets in Mozambique. The company currently holds a 10 percent stake in one of Mozambique’s potentially lucrative offshore natural gas blocks. However, as is true of the rest of Mozambique’s offshore reserves, obstacles have prevented the block from being fully developed.