Mozambique seeks to engage local service providers to supply goods and services to gas megaprojects to drive in-country value generation and retention
While overall transactions dropped by eight percent in sub-Saharan Africa in 2020, in Mozambique, the number of transactions rose, with 12 deals reported compared to only four deals in 2019, according to a Baker McKenzie analysis. Despite ongoing market uncertainty due to COVID-19, for Mozambique, this comes as little surprise: in recent years, the country has emerged as a regional hub for energy investment and development on the continent, as foreign investors spearhead gas megaprojects and local service providers seek to access large-scale contracts.
Energy multinationals including Total, Mitsui, ONGC, PTTEP, Eni and ExxonMobil have already invested more than US$20bn in the country. Last August, 68 USA companies signed engineering, procurement and construction contracts to supply equipment and services to the landmark Mozambique LNG gas-processing facility, with individual contracts reaching US$1.8bn. Moreover, Saipem and Subsea 7 inked a major contract for subsea work on the offshore Mamba Area 4 project, which is on track to feed gas from the field into the Rovuma liquefaction trains, with a final investment decision expected later this year.
In 2021, deal activity in Mozambique and on the continent is expected to increase, as the sector continues to recover from COVID-19 and foreign direct investment begins to flow. The influx of capital into Mozambique is also supported by the country’s relatively attractive contractual terms, characterized by a public bidding process, limited government involvement and preference granted to local entities. Looking ahead, the key to unlocking the full scope of Mozambique’s energy development lies within strengthening its engagement with local service providers, in turn driving down costs associated with the procurement of goods and services for international oil companies, while ensuring local value generation for Mozambican firms.
