20 July 2020, Johannesburg, South Africa - The Development Bank of Southern Africa (DBSA) is pleased to announce financing to the value of US$120 million in Mozambique’s Area 1 Liquified Natural Gas (LNG) project.
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).
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About the Development Bank of Southern Africa (DBSA)
The Development Bank of Southern Africa (DBSA) is a leading Development Finance Institution (DFI) in Africa. Established in 1983, the DBSA participates across the entire infrastructure value chain and provides planning, project preparation, financing, and implementation support for economic and social infrastructure in South Africa, SADC and the rest of the African continent. The institution’s mission is to improve people’s lives, boost economic growth and promote regional integration through infrastructure development.
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