Mozambique still counting on coal

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Coal Independent Newspapers

Maputo - Mozambique is still counting on increasing coal exports to expand its infrastructure and drive economic growth, despite depressed global prices which might delay the timing of some major railway and port projects, the transport minister said.

Gabriel Muthisse told Reuters the government was also keen to attract investors to help build the infrastructure needed to exploit huge offshore natural gas reserves in the north.

The World Bank has forecast that coal and gas may generate up to $9 billion (R95 billion) in revenues by 2032 for the southern African state, which is still poor and recovering from a 1975-1992 civil war.

Rio Tinto, Brazil's Vale and India's Jindal have invested heavily in developing Mozambique's coal deposits - the fourth-largest untapped recoverable coal reserves in the world.

But billions of dollars of investment in rail and port expansions are still needed to carry the coal from the inland Tete mines to the seaborne market.

With global prices for coal in the doldrums because of oversupply and sluggish demand, experts and producers say Mozambican coal mining operations face an uphill battle to be competitive in the next few years, especially when so much infrastructure capacity still needs to be built.

In an interview at the weekend, Muthisse said coal producers in Mozambique may face a “strategic wait” before their export operations become fully profitable, but the government remained committed to developing the coal industry as a growth driver.

“We're still counting on coal,” the minister said.

“Our bet is that Mozambique continues to be one of those countries that keeps its coal industry open, and continues to be an important player at a world level.”

Mozambique's current coal export capacity stands at around 6-7 million tonnes per year, with the central Tete-to-Beira line its main export outlet.

Muthisse said the country aimed to ramp this up to at least 80 million tonnes annually.

This required completing “crucial” additional railway-port projects such as Vale's Tete-Nacala project and the Moatize-Macuse project being developed by a Thai-Mozambican consortium.

“If the coal industry goes out of business, this will affect the logistics structure of the country,” Muthisse said.

He acknowledged that depressed market conditions might impact the pace of strategic infrastructure investment. “I'm seeing more the possibility of rethinking the timetables, rather than any possibility of cancelling the projects,” the minister said.

Vale says it hopes to run its first full coal train on the Tete-Nacala line this year.

The consortium led by Bangkok-based contractor Italian-Thai Development Pcl that is handling the Moatize-Macuse railway-port development says depressed coal market conditions make the 2018 commissioning target for the $4.5 billion project “tough”.

Muthisse said he believed coal prices would recover, predicting future demand would come from India and Japan, as well as Asian powerhouse China and even fast-growing Africa itself. “The world will still continue to need coal,” he added.

“Strategically, if I were an operator in coal, I wouldn't be exiting from here, but evidently if some do leave, the nation will be looking for partnerships elsewhere, both in actual extraction and in the logistics,” the minister said.

He added Mozambican rail and port operators would work with the miners to reduce costs to keep the coal sector competitive.

HIGH HOPES FOR GAS

In a May economic outlook report for Mozambique, the IMF saw the country's economy growing 8 percent annually in the medium term - one of the higher rates in Africa.

But it said Mozambique faced risks from climate disasters, commodity price shocks and variations in global demand for its coal and gas, as well as “financing risks for megaprojects”.

In the north where Eni and Anadarko are moving ahead with big liquefied natural gas (LNG) projects, the IMF saw “substantial revenues” coming from these by around 2022.

“Mozambique is still several years away from becoming a resource-rich country,” the IMF report said, adding there was uncertainty about the magnitude and timing of expected revenues.

Muthisse said President Armando Guebuza, who will step down after two terms following an election in October, was insistent that Mozambique needed to quickly develop its LNG potential by the end of this decade, noting LNG supplies coming on to the market from West and East Africa and changes including the United States moving from energy importer to exporter.

The window of opportunity “won't be open for ever”, he said.

Mozambique had recently set up a public company, Portos de Cabo Delgado, bringing together state rail operator CFM and national oil company ENH, to develop strategic onshore infrastructure in the north required for LNG exports.

The venture would seek partners to expand the northern Pemba and Palma ports “so this infrastructure can be ready for 2018, or even 2016, when the industry needs it,” Muthisse said. - Reuters


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