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The Board of Directors of the African Development Bank Group(AFDB) has authorised a long-term Senior Loan of $400 million to support Mozambique’s dream of becoming a global player in the production of Liquefied Natural Gas(LNG). The fund would facilitate the building of an integrated LNG plant, including a liquefaction facility in the country.

Commenting on the endorsement, Bank Group President, Akinwumi Adesina said: “Through its participation, the African Development Bank again demonstrates its leading role in supporting Africa’s transformation.” He added that “the catalytic effect brought about by the Bank is strategically aimed to help transform Mozambique from ‘developing’ to ‘developed’ nation.”

The Mozambique LNG Area 1 Project is currently listed as Africa’s single largest Foreign Direct Investment. It comprises a global team of energy developers and operators, led by Total alongside Mitsui, Oil India, ONGC Videsh Limited, Bharat Petroleum, PTT Exploration and ENH (Mozambique’s national oil and gas company).

This approval adds AFDB to a global alliance of commercial banks, development finance institutions, and export credit agencies, who would collectively provide the essential senior debt financing for the project.

The Southern African country’s natural gas reserve discoveries are estimated to hold over 100 trillion cubic feet, which is expected to double in its prospection phase. This sets the country as one of Africa’s largest natural gas reserve holder.  

According to a report by the International Comparative Legal Guides, the country, currently, does not have a single LNG facility. The Mozambican government, however, has made several important agreements in the past year with concessionaires of Area 1 and 4 which has been executed. Previous moves by the government have laid a foundation for what could become the first floating LNG facility in Africa, which according to the agreement has a generating capacity of 20 million tonnes per year, from 2023. In June this year, the group of investors reached a final investment decision on the project, which carries a price tag in excess of $20 billion – this facilitated its commercialization. 

However, AFDB has reported that the LNG liquefaction plant will have a production capacity of 12.88 MTPA. The Project is the first of several LNG trains expected to undergo development in the northern part of the country. Mozambique is expected to become one of the world’s largest LNG exporters and its gas represents an important source of supply diversification, which stands to benefit the global energy markets.

With AFDB’s participation, key social and economic indicators would be introduced into the loan monitoring system. It would ensure job creation, gender empowerment, and linkages for small businesses. With a portion of the gas allocated to the domestic market, the Bank’s focus is on supporting economic diversification and industrialization in both Mozambique and across Southern Africa.

Further commenting on the loan approval, AFDB’s Adesina said: “Working closely with the Government of Mozambique, we can ensure that the local population reaps the benefits from its nascent natural gas value-chain, thus creating growth opportunities and widespread industrialization, while at the same time accelerating regional integration across Southern Africa.”

The African Development Bank Group (AfDB) also known as Banque Africaine de Développement (BAD) is a multilateral development finance institution. Founded in 1964, it comprises three entities: The African Development Bank, the African Development Fund and the Nigeria Trust Fund. The AFDB aims to fight poverty and improve living conditions on the continent by promoting the investment of public and private capital in projects and programs that are likely to contribute to the economic and social development of Africa. Its headquarter is in Abidjan, Côte d’Ivoire and has a membership of 80 countries.

By Ishioma Eni

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