Last week, lowly Mozambique, one the poorest nation’s on earth, began LNG exports:
Mozambique flagged off its first shipment of liquefied natural gas, exports that could help ease Europe’s energy crunch as Russia squeezes supplies.
For Mozambique — one of the world’s poorest nations — it marks the end of a decade-long wait to monetize one of Africa’s largest offshore gas fields. President Filipe Nyusi announced the cargo’s departure in a statement Sunday.
This is humiliating on a number of fronts for Australia’s east coast and its governments.
Mozambique is pure sovereign risk. It is in the midst of an Islamic-state insurgency, has recently been shocked by hidden debt scandals and has a history of civil war.
Even so, the FLNG project has gone ahead and more than $100bn in investment is planned for more LNG terminals, albeit amid delays as the insurgency ebbs and flows.
This should sober up anybody concerned about the same energy firms claiming Australian sovereign risk will cost it investment.
The second dimension of the Mozambique experience that should sober Australians is the regulatory regime of the impoverished and corrupt government.
It has imposed a rising tax scale that is easy for the 2020s then ratchets higher to 30% and 75% in the subsequent decades.
40% then 50% of this revenue will go into the sovereign wealth fund.
Africa has a gloomy history of underachieving tax targets thanks to corruption but, even so, it will do considerably better than the east coast’s shockingly crap tax return and prevent the currency from rising as well.
Moreover, Mozambique has imposed domestic reservation to trigger industrial development.
The full investment and benefits will require a resolution of the Islamic issue but that seems increasingly likely as Europe turns its eye to more African gas and EURs can flow to all concerned.
In short, if a poor, wartorn, corrupt, and inept African nation can get energy policy right, it takes a special kind of dill to get it so wrong as Australia’s east coast.
The fallout from that world-beating imbecility is still on full display today. Asian LNG and coal are still at nosebleed prices:
Local gas prices at $19Gj:
With power futures for next year still calamitous:
So, is the Albanese Government that special kind of dill or is it going to do something?
