DOWNSTREAM OIL THEFT

Downstream Oil Theft: Global Modalities, Trends, and Remedies
manages downstream operations. The country serves
as a transshipment hub for destinations in the interior;
imports come through the ports of Maputo, Beira,
and to a lesser extent Nacala before being shipped
to locations in South Africa, Malawi, Zambia, and
Zimbabwe. 289
Oil is not a major part of the resource picture in
Mozambique. Only in 2014 was oil found offshore—a
small pocket, expected to produce only 2,000 bpd. 290
The country’s known hydrocarbons resources consist
mainly of coal, its current chief export, and natural gas,
of which it holds some of the world’s largest reserves.
The country’s onshore gas reserves have already
begun to be monetized, primarily in cooperation with
the South African company Sasol. The 865 km Sasol
pipeline (also known as the Rompco pipeline, after
the Republic of Mozambique Pipeline Investments
Company), developed in 2014 and expanded in 2015,
transports gas from a processing plant in Temane,
Mozambique, to a power plant and distribution hub
in Secunda, South Africa. 291 In March 2016, Sasol
announced that it would be significantly expanding
its onshore operations at Temane. 292
The recent rush on Mozambique, however, is primarily
about offshore discoveries of natural gas, which are
estimated to form the bulk of the country’s total
reserves of about 170 trillion cubic feet. The gas has
been found in the Rovuma Basin off the northern
coast, primarily in “Area 1,” developed by the American
firm Anadarko, and “Area 4,” operated by Italian
company Eni. 293 Revenues from these discoveries are
not expected to hit their stride for a few years, not
least because they will require a massive investment in
LNG infrastructure; figures on this vary, but Anadarko
and Eni have estimated an outlay of $30 billion to
begin producing approximately twenty million tons
289 “Mozambique Biofuels Assessment,” Econergy, May 1, 2008,
http://www.globalbioenergy.org/fileadmin/user_upload/gbep/
docs/BIOENERGY_INFO/0805_WB_Italy_-_Mozambique_
biofuels_assessment.pdf, ES-11.
290 “Mozambique Due to Become Oil Producer in 2014,”
Macauhub, January 6, 2014, http://www.macauhub.com.mo/
en/2014/01/06/mozambique-due-to-become-oil-producerin-2014/.
291 “Mozambique Gas Line in US$210 Million Expansion,” Sasol.
com, November 30, 2015, http://www.sasol.com/media-centre/
media-releases/mozambique-gas-pipeline-us210-millionexpansion,.
292 “Sasol Investing $1.4bn to Grow Mozambique Gas Platform,”
MiningWeekly.com, May 30, 2016, http://www.miningweekly.
com/article/sasol-investing-14bn-to-grow-mozambique-gasplatform-2016-05-30.
293 “New Petroleum Law: The Future of Oil and Gas in
Mozambique,” Clifford Chance, October 2014, https://www.
cliffordchance.com/briefings/2014/10/new_petroleum_
lawthefutureofoilgasi.html, 1.
of LNG per year. 294 Development has slowed in 2016,
however, due to a range of factors, including the low
price of gas, the expense of erecting the necessary
infrastructure in the north of the country, and falling
confidence in the Mozambican government’s ability
to manage its finances. Nonetheless, in March 2016 a
consortium consisting of ENH, the China Petroleum
Pipeline Bureau, South Africa’s SacOil, and the Dutch
firm Profin committed to constructing the $6 billion,
2,600 km African Renaissance Pipeline linking the
Rovuma gas fields with South Africa. 295
Concern remains, though, that Mozambique is less
than ideally positioned to take advantage of its gas
reserves. Though the government’s 2014 revision of its
hydrocarbons legal framework included tax incentives
and a sliding scale on revenue sharing in which the
state’s take increased between 40 percent and 85
percent pegged to the production rate of return, 296
much remains unclear. The many Asian industry
players who have minor shares in Mozambique’s
gas fields are also aware that the United States and
Australia are beginning to inject vast quantities of LNG
into the market much sooner than Mozambique, not
only providing an attractive alternative source but also
conceivably keeping prices down. 297 For those reasons
alone, Mozambique’s window may be closing for now.
Delays were aggravated in 2016, when Mozambique’s
credit and credibility took a massive hit. In April and
May, the revelation of hidden outstanding debts,
nonpayment on loans, misappropriated funds, and
a completely failed $850 million bond issue for an
alleged tuna-fishing fleet added up to nearly $10
billion in total debt—90 percent of the country’s
GDP. 298 It was clear that the prospect of untold riches
from natural gas had inspired a binge of speculative
borrowing that collapsed along with commodity
prices. Combined with the rising political violence
and a severe drought in parts of the country, this
scandal put Mozambique’s future in doubt. 299 Industry
294 Manuel Mucari, “Mozambique Sees $30bln Investment
for 2018 LNG Exports Startup,” Reuters, August 21,
2014, http://www.reuters.com/article/mozambique-gasidUSL5N0QR49C20140821.
295 “Analysis: A Sign of Life from Mozambique’s Energy
Sector,” Further Africa, March 3, 2016, https://furtherafrica.
com/2016/03/03/analysis-a-sign-of-life-from-mozambiquesenergy-sector/.
296 Nuno Cabeçadas, “Mozambique: The Hottest Frontier,” Miranda
Correia Amendoeira &Associados, November 2014, http://www.
mirandalawfirm.com/uploadedfiles/20150205_2521af.pdf.
297 Alex Vines et al., Mozambique to 2018: Managers, 3-4.
298 Alex Vines, OBE, “How Can Mozambique Manage Its
Debt Crisis?” Chatham House, May 16, 2016, https://www.
chathamhouse.org/expert/comment/how-can-mozambiquemanage-its-debt-crisis.
299 Ibid.
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