Mozambique's LNG Dreams Face Headwinds as Global Supply Ramps Up
These projects were intended to transform the economic trajectory of one of the world's poorest nations.
MAPUTO, Mozambique- Mozambique's aspiration to become a major global supplier of liquefied natural gas could be hindered in the coming years as a flood of new LNG export capacity is forecasted to dampen prices and intensify competition, according to a new energy market analysis, writes Charles Mangwiro.
The Institute for Energy Economics and Financial Analysis projects global LNG supply will surge 40% to 666.5 million tonnes by the end of 2028, outpacing demand growth.
In its Outlook report released Friday, IEEFA warns the anticipated slump in LNG prices will undermine prospects for higher-cost production regions like Mozambique.
"As demand growth faces challenges and LNG markets head into an extended period of oversupply, proposals for new supply projects—particularly higher-cost facilities in Africa, Australia and Canada—will face stiffer headwinds," said Clark Williams-Derry, energy finance analyst at IEEFA.
Mozambique's gas is considered more expensive to produce compared to other sources, potentially squeezing it out of key markets like Europe that could pivot to cheaper options during an oversupplied period.
Demand for LNG also is projected to wane through 2030 in major importers like Japan, South Korea and Europe, which together account for over half of global intake.
"Controlling gas demand is the most effective insurance policy," said Ana Maria Jaller-Makarewicz, IEEFA's lead Europe analyst. "Geopolitical factors could trigger another energy crisis and expose the LNG market's volatility and vulnerability to global conflicts."
IEEFA, a U.S-based independent think tank, urged governments to reduce reliance on volatile fossil fuels and accelerate investment in renewable energy rather than remaining "beholden to the vagaries of the global gas market."
Over the coming decade, Mozambique is expected to become a major LNG exporter due to the discovery of over 180 trillion cubic feet of natural gas reserves in the Rovuma basin in the north.
These include the $20 billion project led by French firm TotalEnergies that was halted in 2021 due to the violent insurgency by Islamic State-linked militants in the gas-rich Cabo Delgado province.
The U.S. government has committed nearly $6 billion in loans and insurance toward two other multibillion-dollar LNG projects led by Eni/ExxonMobil and TotalEnergies in the Rovuma basin, representing its largest investment on the African continent.
These projects were intended to transform the economic trajectory of one of the world's poorest nations.
However, IEEFA's analysis suggests an increasingly challenging market awaits as a surge of new LNG terminals from the U.S., Qatar and elsewhere brings a wave of supply that could depress prices over the next four years.
"The gas crisis exacerbated by the full-scale invasion of Ukraine brought challenges and opportunities to Europe, where, despite an increase in LNG imports, energy security was ultimately maintained thanks to a historical 20% reduction in gas consumption," Jaller-Makarewicz said.