The total project costs are estimated to be US$24 billion, partly financed through senior loans of as much as US$14.9 billion from various lenders. The DBSA portion of the funding will be used towards upward and downstream project development activities required to extract natural gas offshore, bringing it onshore for processing before conversion to LNG for export to various markets.
Approximately 150 trillion cubic feet of gas has been found in Mozambique, which makes it one of the largest gas discoveries worldwide and will position the country to become a major global supplier of LNG. “The project will unlock significant opportunities across the continent to export gas as an alternative energy resource. With South African equipment suppliers and other service providers expected to play a significant role in the project, it will generate export earnings for South Africa,” said Mohan Vivekanandan, Group Executive for Deal Origination and Client Coverage at the DBSA.
The Area 1 LNG project consists of several partners, lenders and sponsors including consortiums from South African commercial banks, Export Credit Agencies (ECAs) and the African Development Bank. Societe Generale acted as the financial advisor. The project’s final investment decision was approved by the President of Mozambique, Filipe Jacinto Nyusi in June 2019.
“This investment aligns with the DBSA’s mandate which seeks to promote regional development by partnering and leveraging skills and expertise from both the private and public sectors. Together with other similar initiatives in the Rovuma basin, the project will catalyse South Africa’s gas industrialisation aspirations and the implementation of gas to power projects,” said Mpho Mokwele, Head: Project Finance at the DBSA.
It is estimated that the key driver which led to significant market interest in the Area 1 LNG project was the estimated multiplier effect on Mozambique’s development and industrialisation prospects, which will significantly boost GDP, export earnings and job creation, thereby providing opportunities for infrastructure development and harnessing Mozambique’s manufacturing and agricultural sectors by creating gas-related downstream industries.
“The gas sector has the potential to positively harness economic and social integration and cooperation between SADC and adjoining regional economies in Africa,” said Davies Pwele, Head: Coverage (SADC) at the DBSA.
The DBSA has prior investments in the gas sector. These include development support offered to Sasol Natural Gas, Société Nationale Petroleum du Congo (“SNPC”), Companiah Mozambican Hydrocarbonatoes (“CMH”) and the Tema Liquefied Natural Gas (LNG) Terminal (Ghana).
About the Development Bank of Southern Africa(DBSA)
The Bank is a government-owned development finance institution, delivering developmental infrastructure in South Africa and the rest of the African continent. The DBSA operates across the entire infrastructure value chain which includes identifying, preparing and co-financing the development of infrastructure related initiatives in the Energy, Transport, Water and ICT sectors. The DBSA has total assets of US$9 billion as of October 2019. The remainder is exposed to the wider Sub-Saharan Africa region, particularly in Mozambique, Zambia, Angola, Senegal and Ghana.