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Mozambique

Pemba Postcard: How A Natural Gas Boom Is Changing Mozambique

The once sleepy coastal city is now buzzing with activity, and foreign investors.

The port of Pemba
The port of Pemba
Sébastien Hervieu

PEMBA — There used to be so few cars here that locals knew exactly who each one belonged to. That was "before they discovered gas," recalls one resident in Pemba, a coastal city in northern Mozambique.

Now the place is crawling with cars. There are maybe 2,000 in circulation. Chinese-manufactured mopeds have begun to appear as well in Pempa's increasingly asphalted streets.

Flights to the capital, Maputo, used to leave once a week. Now they are daily. The airport has been refurbished and there are also flights to Nairobi and Johannesburg. Three hotels are being built on the oceanfront. An increasing number of investors are looking to buy offices, and real estate speculation is causing prices to soar.

“Just think, there will soon be an eight-story-high building in Pemba!” says one of the mayor’s advisors. The man is also excited about the prospect of soon being able to do his grocery shopping in a supermarket chain from South Africa rather than in one of the small local shops.

Building frenzy

Given its proximity to the extremely rich subsoil of the Rovuma basin, near the border with Tanzania, the port city has become a key outpost on the new gas frontier that stretches along the coast of East Africa. Some 5.6 trillion cubic meters (197 trillion cubic feet) of natural gas have already been discovered there by Italian energy company ENI and the Anadarko Petroleum Corporation, a U.S. firm.

And that’s not all. The government is soon expected to allocate 75,000 square kilometers (29,000 square miles) worth of new concessions. Mozambique, one of the world’s poorest countries, could thus become one of the world's top three gas producing countries once exports begin in 2018, according to authorities in Maputo.

A study published in July by the South African bank Standard Bank suggests that between now and 2035, the natural gas industry will create some 700,000 jobs. During the campaign for the recently held presidential election, the Frelimo — the governing party — promised to use the future financial windfall from royalties and corporate taxes to invest in infrastructure, education and healthcare services.

In his air-conditioned office, Benedito Martins, an enthusiastic transport official for the province of Cabo Delgado, takes his tablet and points to the location of the current worksites on a digital map. “Here, we are finishing the refurbishment of the road leading to Palma, in the north, where we’ll build the liquefaction factory that will allow us to export gas. It will only take five hours to drive there, instead of seven now,” he says. “And there, a new airport will be built to receive bigger cargo.”

On the outskirts of town, the first stone of a future port logistics platform was laid in August during a ceremony attended by President Armando Guebuza. A large sign with a diagram indicates the size of the Pemba 2 project to the few fishermen readying their nets before heading out to sail the turquoise waters.

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Fishermen in Pemba — Photo: Shaun Metcalfe

“By 2016, 300 meters of wharfs will be built. Within 30 years, there will be 5.5 kilometers,” says José Daude as he flips through his thick presentation leaflet. The man in charge of the project for the state-owned company Portos de Cabo Delgado says that this new terminal will enable gas extraction companies to receive the supplies they need.

Murky dealings?

Near the center of Pemba, a floating dock that adapts its height depending on the tide is already harboring the imposing ships of Anadarko and ENI. It was custom built by a French firm called Bolloré Africa Logistics. “We would have liked to get the contract for Pemba 2. We understood we wouldn't, however, when the director of Portos de Cabo Delgado told us he would study our offer but that there would be no open call for bid,” says a senior figure at Bolloré.

The coveted contract instead went to an Italian-Nigerian company called Orlean Invest, now the privileged partner of Mozambique's state-owned ENH Logistics. “We chose the best technical and financial offer. The accusations of corruption are groundless,” says the region’s governor, Abdul Razak Noormohamed, in response to criticism that the government failed to be transparent in its awarding of the estimated $150 million contract.

Companies with close ties to the Frelimo may also soon take part in the project. “Unfortunately, this is classic,” says Adriano Nuvunga, director of the Centre for Public Integrity in Maputo. “Senior politicians in the party decide, in the government’s name and with public funds, to buy shares in a project. Later they acquire the shares for themselves at a knockdown price.”

For the gas companies, the biggest concern is that the port’s construction is not delayed. If the start date for extraction gets pushed back, the potential buyers of Mozambican gas could turn to other countries.

The much heralded gas boom, in other words, could still go bust. A few years ago, the discovery of vast coal deposits caused a frenzy among investors. But in July, the British-Australian giant Rio Tinto announced it was selling its mines because of a fall in prices and the lack of transportation infrastructure to move the coal to the ports for export.

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