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The African Development Bank (AfDB) has concluded its bid to co-finance the construction of an integrated Liquefied Natural Gas (LNG) plant in Mozambique by signing a US$400mn senior loan for the transformation project

28540014955 659caf8b65 cThe project includes both onshore and offshore components. (Image source: Blondinrikard Fröberg/Flickr)

The Mozambique LNG Area 1 project, estimated to cost more than US$20bn, has been ranked as the largest single foreign direct investment in Africa to date. It includes a global team of energy developers and operators, led by Total alongside Mitsui, Oil India, ONGC Videsh Limited, Bharat Petroleum, PTT Exploration, and Mozambique’s national oil and gas company, ENH.

The Bank joins a global syndicate of commercial banks, development finance institutions, and export credit agencies with the signing on July 15 to provide the required financing for the project. Financial close is expected to take place later in 2020.

The project, which benefits from one of the most significant natural gas reserves in the world off the coast of northern Mozambique, will be the first development of liquefied natural gas in the country. It will consist initially of two LNG trains with a total annual capacity of around 13 million tonnes.

In addition to being transformative for Mozambique’s energy sector, the project is expected to bring broader socio-economic benefits for the country.

Abdu Mukhtar, director of the Bank’s industrial and trade development department, said, “Signing the Mozambique LNG Area 1 agreement heralds a new age of industrialisation for Mozambique.” He noted that gas purchasers, such as fertiliser plants, had the potential for improving regional and global competitiveness.

The project includes both onshore and offshore components, which will be funded through a combination of equity, pre-completion cashflows and more than US$14bn in senior debt facilities. The senior debt consists of a mix of direct loans from the Export Credit Agency (ECA), commercial bank loans and the Bank’s facility, the only multilateral development institution involved in the initial phase of the project.

Wale Shonibare, the Bank’s director for energy financial solutions, policy and regulation, said, “The project would create a new energy model in Mozambique and help to electrify Southern Africa. Through the availability of domestic gas, the project stands to facilitate the development of gas-fired electricity in Mozambique. This will play a major role in providing reliable and affordable energy for the country and the wider region.”