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Still in the learning stage, but progressing rapidly

Interview - June 7, 2013
Arsénio Mabote, President of the National Institute of Oil (INP), shares with Upper Reach his vision for Mozambique’s management of its natural resources, especially gas, and how it strives to develop them wisely and sustainably
After 1993, Mozambique began to grow very fast; today Mozambique is topping the list of African countries in terms of growth rates. The newly discovered natural resources will toast Mozambique with a very important base of investments. How do you see these resources contributing to the evolution of the economy for the years to come?

We are moving into a phase where we are not only concerned with alleviating poverty but also looking forward in terms of developing economically. We still have many poverty-related problems, but they are gradually being resolved. The discovery of mineral resources, is encouraging and strengthening the process of development and will contribute to give impetus to other sectors of the economy.
Mozambique is an agricultural-based country; therefore agriculture should be a priority for the country. The Government already has policies outlined on this front to make the energy resources nurture the development of agriculture. We feel that we need to mechanise agriculture, which still remains quite rural and subsistence-based. With the gas resources, we will be able to produce fertilisers that will be used to create a more productive agriculture sector.
On the other hand, we should look at the mineral resources as a great opportunity for economic development. The country has in its hand the key to generate employment, industrialise, build local capacity, etc.
However, we must look at the natural resources with a wiser development perspective. Even though we count with the great discoveries in the Rovuma basin, we are still lacking basic infrastructure. In Palma (Cabo Delgado Province), for instance, there is a lack of schools, hospitals, roads and bridges. We must take the opportunity to move forward together with the projects underway in those areas in order to create these structures so that local communities benefit from these projects.
The discovery of natural resources, especially at the scale of the Rovuma Basin or Moatize, bring crucial debates to the table, both at home and abroad. Some of the harshest critics say Mozambique can end up like many other African countries that have fallen victim to the natural resource development trap. How can we visualise the future of Mozambique given the experiences of countries such as Nigeria, Ghana, Angola, the Gulf States, Norway, etc.?  

My response to these statements is that Mozambique will end up like Mozambique, because Mozambique has its own specific conditions and its low level of development makes it a unique case.
The current situation of Mozambique, with the recent findings, is not the same as Nigeria, because we did not discover crude oil like Nigeria did 50 years ago. The demographic conditions are different (Nigeria has about 160 million inhabitants while Mozambique only has 22 million). Mozambique is discovering resources in a time where the historical lessons are much clearer.
We cannot aspire to be like Norway, because when they discovered the resources in 1969, they had already a high level of development. Norway was a country of shipping, with a very advanced industry, in a continent where things were moving forward. Mozambique is an African country that comes from a long war, housed in a completely different context than Norway. Even the resource discovery is different, because Mozambique discovered gas and Norway discovered oil.
Mozambique will be like Mozambique. We have to avoid finding a platform for economic development that makes us very dependent on the resources. One of the options is using these non-renewable natural resources to develop other types of industry that will exist even after these resources have been exhausted.
In this context, for example, in Kuwait and Saudi Arabia, educational institutes were created to meet the local needs of creating capacity and generating a strong domestic workforce. Does Mozambique share this strategy?

The Government has designed a strategy for staff training, which aims at filling this need for staff for the mining and oil and gas sectors in the fields of: training, engineering, geologists, lawyers, etc. This wide range of professionals will truly be the one to develop the economy and provide the country with institutions and companies that will initially use expats to develop crucial activities.
Recognising that we are a country without these capabilities, in terms of skilled manpower to develop these complex activities, we want gradually to replace the foreign manpower for the domestic. Everyone wants Mozambicans to feel they are part of the process.
In what ways shall the history of Mozambique be portrayed to the international community to explain the recent changes and the economic maturity the country is leveraging to achieve?

No country is perfect, so is the case of Mozambique. The Government is developing policies to solve all kinds of problems in the mining sector. The Government is part of the initiative for extractive industry transparency.
We have an open Government with nothing to hide; we want to show the world everything we do. For this reason we created the Anti-Corruption Unit to supervise mining processes. We are dynamic and we are changing with the flow as things are developing: we are adjusting ourselves. For example, the Mining and Oil Laws are under review because we know that, given the appetite for new investments in Mozambique, we need to create a new framework. We see what we can adjust to better serve the investor’s and national’s interests.
After hearing the legal developments from you and other political and business leaders, we assure that Mozambique has a fine legal structure to capitalise on this historical moment. However, as in many African countries, it is not the law itself but its implementation what creates gaps that hinder the development process…

In the activity of doing business, the Government has worked in this direction, and we have had several meetings to improve it; it’s making a work of identification of the Government’s more weakened areas. Two weeks ago, we had a presentation of the Doing Business’s status in Mozambique compared to other countries. We are noting that we are moving towards filling those gaps, still, there are many to fill, but we are on the right path.
Of the top 20 countries with gas, almost all of them have also very important oil reserves. What is the likelihood of oil discovery in Mozambique?

When we launched our race for the exploration of hydrocarbons (oil and gas) in the Rovuma Basin and found natural gas (about 150 TCF), it didn’t mean we would stop the researching activities. The existence of this reserve demonstrates that Mozambique has great potential, not only for natural gas but other minerals, too.
We have an extensive sedimentary basin and areas in which we have no information. We have already launched contests for speculative purposes to several areas in the southern part of the Rovuma Basin, in the offshore and onshore areas (aero-magnetic surveys that will be conducted in the onshore). This will help us prepare a database to launch future bids and force companies to do activities in virgin areas.
Our strategy is to maximise our knowledge for the potential discovery of hydrocarbons and for that we must continue to do explorations in the various areas that have potential for both natural gas and oil.
We feel that the gas reserves in the Rovuma Basin are in offshore area (major sources). The production of large amounts of gas is expensive, so we need an anchor-design that allows paying the costs of developing the offshore gas (which is liquefied natural gas) for exportation to Asian markets, such as Japan, India, China, South Korea, etc and the rest of the world.
Our mission is not to export all the gas, but to create an incentive to use it locally. The LNG (Liquefied Natural Gas) anchor-project is important for monitoring the gas reserves in the Rovuma Basin, but a portion of it will be used for the country's industrialisation.
One of the reasons why we should continue exploring in central and southern areas of the country is because if we make more gas discoveries along the coast, we will create development centres in other regions of the country. This will allow us to mitigate the costs of shipping, by transporting the gas from other areas of the country. If we have shallow gas, as in Pande-Temane (1500 km), it will be even cheaper than the deeper, as in the Rovuma basin (4500Km). We have to continue the exploration works, who knows, we may find more gas or even oil.
The role of the INP is essential for generating a transparent framework and a trustworthy platform. How is that the INP communicates these core tasks and how do you, as an institution, promote investment in the sector?

The role of our institution is to promote, control and manage oil activities that occur in the country. Our role in the promotion is preparing the researching areas for the companies from the point of view of prospective and production of hydrocarbons.
In the administration, we moderate the production activities of Pande-Temane; we are transporting gas to South Africa and monitoring the activity of production (technically and environmentally) and how the companies are implementing international standards of production, because we do not want our industries to be polluting the environment.
As for the allocation of the exploration areas, we have bidders: when we feel there is a lot of competitiveness, we give equal opportunity to all the players, as ExxonMobil, BP, ENI, Anadarko and many others, which are interested in various offshore exploration blocks. We favour the technical ability of companies to implement programmes that maximise the evaluation of our potential.
What is the most important INP strategy for environment care and conservation. What priority does INP give to sustainable practices both as an obligation and as a commitment of big companies?

The issue of the environment crosses all other sectors. The petroleum sector doesn’t just involve the MIREM (Ministry of Mineral Resources) as well as all others, as MICOA (Ministry of Environmental Coordination). When companies want to develop oil exploration activities, they must follow the specific environmental procedures to the oil sector.
There is a whole monitoring work of the activities development of the firms, since they begin their activities. Companies must have an environmental impact assessment and environmental management plan, which are the instruments to mitigate potential environmental effects. We also do the environmental tutoring of the projects that involve multiple sectors, to force these companies to know the law practiced in Mozambique and the accepted international standards.
That is a key for generating win-win situations. How would you like to see the country once the resources are being processed and exported?

Currently, one of the major constraints we have is our capability. The Government has a clear strategy for the holistic and technical training to provide the necessary access and necessary institutions. Each place must be provided with an empowered labour force to monitor all activities and to build better capacity.
I believe that in 2022, we will have booted the process of exporting gas and oil and we will have institutions with mature professionals capable of making good economic management and oversight of contracts. Although we are still in the learning stage, we are the ones to control it. For example, in the Rovuma Basin, we have to be able to make the mega-projects there bring major economic benefits to the local communities and the country.