02
Oct
The bar and restaurant at the Nautilus, a luxury hotel on Wimbe beach in the northern Mozambican town of Pemba, is busy with foreign guests and visitors every night of the week.
The buzz of activity defies talk of an exodus of hundreds of expatriates since Anadarko and Eni, the two companies leading efforts to transform one of the world’s poorest countries in the world into a major exporter of natural gas, ended exploration operations earlier this year.
A change in Mozambique’s government and the falling global oil price have contributed to delay the start of projects to extract and liquefy huge natural gas finds in the Rovuma basin off the coast of Cabo Delgado, Mozambique’s northernmost province.
Anadarko estimates its projects could yield at least 75 trillion cubic feet (tcf) of LNG, while a 2014 estimate from Eni claims their Area 4 concession will yield over 85 tcf.
Nevertheless, the businesses that support the oil and gas industry are maintaining their presence in Pemba, the provincial capital. They are confident that the projects – which will together require investment of up to $100m, according to the IMF – will eventually come to fruition.
The uncertainty surrounding the Rovuma basin projects echoes circumstances in many regions across Africa where greenfields energy investments have been put on hold after oil prices dropped 60 percent between June 2014 and January 2015.
Italy’s Eni said this year that it expects to take a final investment decision (FID) on its project in Mozambique the third quarter of 2015. In April, Anadarko’s country manager said that FID on its project is “doable” in 2015.
Even if those targets are met, however, business owners do not expect to see the dividends of the investments for some time. “I do not see much happening until the first quarter of 2016,” says Shayne Brown, who owns and runs the Starfish restaurant overlooking the port.
Pemba has lost some 600 jobs since November last year thanks to the lull in gas-related activity, says Omar Saide, head of economic development for Pemba municipality. However, he believes that other large scale projects will help to compensate. “The next phase [in] the construction of the Palma industrial complex, [and] also the Logistics Base [in Pemba], is going to start now and we are going to get back a lot of jobs,” he asserts.
By the end of this year, Mr Saide expects those two projects to create 5,000 jobs across the province of Cabo Delgado, of which Pemba is the capital.
The Pemba Logistics Base is expected to dwarf the town’s existing port and is being designed specifically to support the gas industry. In Palma, a remote village close to the Tanzanian border where the gas will make landfall, accommodation to house up to 20,000 workers needs to be built. These workers in turn will construct and operate liquefaction facilities at Anadarko’s planned ‘LNG park’ at Afungi, a nearby peninsula.
Waiting it out
For now, however, many are waiting for jobs to come back. Mr Brown’s wife, Samantha Holdsworth, runs an import-export operation supplying food to offshore oil and gas operations. The business “grew exponentially and then collapsed exponentially over the last three to four months”, she says. She has now laid off all of her staff of five local workers, but on the understanding they will return to the company when activity picks up again.
Unlike recent arrivals to the town, Ms Holdsworth and Mr Brown say they will be able to ride out the slump. “There is a group of us [who] rode that wave when it got really big, and now the bubble has crashed and all of us are able to financially ride that wave until it comes back again,” says Mr Brown.
The slowdown in offshore activity has an upside for Mr Brown, who says he now has time to spend on other sides of his business. “This restaurant is doing really well,” he says, “because there are still a major amount of expats in town.”
Others servicing the gas industry have packed up and left, though, including Wilson’s Wharf, a restaurant which “went very big very fast”, according to Mr Brown, but which closed earlier this year when things started slowing down. Tall Orders, a South African firm which specialised in trucking supplies to Pemba from Nelspruit, closed down this year as well.
Frank Dekker, country manager for marine services company Subtech, is running a scaled-down operation in Pemba and picking up work where he can. He believes maintaining a presence will give his company an edge once investment picks up again.
The idea, he says, is to maintain a company “that can easily grow because you already know how to operate: you know the laws, and how the banking and tax system operates”, he says. “In the short-term we need to watch costs, but there are opportunities now that we are here – more come your way.”
Subtech currently has divers doing maintenance work on Kenmare Resources’ heavy sands mine in Nampula province, for example.
Part of Pemba’s resilience to the knock on effects of commodity shocks is that gas is not the only game in town. At the Nautilus hotel, business has been “surprisingly stable” thanks to business from Cabo Delgado’s growing graphite and ruby mining and cotton farming industries, says hotel manager Ant Perdikis.
“We are running at the same levels” as during the height of the gas exploration boom, he says. The 60-room hotel has had to turn away custom this month, according to Mr Perdikis. Further down the beach is the 185-room Pemba Beach Hotel, owned by Minor International, while Tanzania’s Motisun Group has just opened a new 84-room hotel, called Raphael’s, also targeting business travellers.
Pemba is also a major draw for Mozambicans in search of work. Under Mozambican law, companies must hire five or 10 local employees for each foreigner they have on the payroll, depending on the size of the company. Although the gas companies have gained some exemptions to these rules to be able to develop the projects, there will still be a big boost to the local economy – particularly taking into account the domestic staff that expatriate workers typically employ. “Each guy will have his housemaid, his house guard, and so on,” Mr Brown points out.
“The economy is going to grow,” says Omar Saide. “The level of business will grow, standards of living will rise. But this will also bring problems – environmental and social problems, as a lot of people will move here. But that’s the dynamic of development.”
Source: http://www.thisisafricaonline.com/Business/As-investment-decisions-pend-Mozambique-s-gas-boom-town-rides-out-the-lull?ct=true?utm_campaign=TIA+View+from+IMF+Preview+email+01%2F10&utm_source=emailCampaign&utm_medium=email&utm_content=