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Government Revenues From Coral Flng

Mozambique’s rich natural gas reserves in the Rovuma basin have been seen as a potential game-changer for Mozambique, providing it with critical revenues that the country could invest in sustainable economic and human development.

Yet public expectations regarding the timing and scale of these revenues may be unrealistic – forecasts have assumed early first exports, rapid expansion of production capacity and very high LNG prices – and they come at a time of increased debt burden and declining donor support for Mozambique.  

This report provides an independent government revenue forecast for the ENI-operated Coral South Floating Liquified Natural Gas (FLNG) project, the first natural gas project in development in Mozambique, and provides lessons for the sector more broadly.  The analysis suggests that the government share of revenues, around 49% at a $70/barrel oil price, is relatively low and that the bulk of these revenues are generated late in the project life cycle, only starting in the 2030s.  If there are cost over-runs, or if prices remain low, the start of significant government revenues will be pushed back even further. The revenue logic contained in the 2006 EPCC should be taken into account in considerations of debt repayment and future budget planning, and Mozambique should take measures to review the fiscal terms and ensure government capacity to monitor the projects to maximize revenue collection under those terms.

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