Good afternoon. Mozambique’s state-owned oil and gas company, ENH, is pressing ahead with plans to move into operation of oil and gas fields (see below). Under the ten-year strategic plan presented last year, the firm intends to transform itself from one that just takes a minority stake in gas projects and collects revenue from them, to one capable of developing projects itself and operating them.
Already, ENH has been training engineers in how to build and run oil and gas infrastructure, including on the Coral South floating gas platform operated by Eni of Italy. Now, it has announced a joint venture with Baker Hughes, the American oil and gas technology and services company, to provide a range of core technical services for oil and gas projects, like well construction and supplying subsea pressure systems. This is an ambitious venture, and one which will draw on the support of one of the world’s biggest oil and gas services companies. Investing in skills and capabilities like this costs money, which ENH does not have, but it should be able to get low-cost loans or grants from the World Bank and other development lenders and donors, who are happy in principle to support capacity building projects. ENH’s ambition is therefore feasible. However, plenty of risks lie ahead.
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An obvious risk is that elites in the ruling Frelimo party, who are always on the lookout for illicit ways to make money, will try to use their connections to act as intermediaries and win contracts, so that they can earn commission payments or bribes for themselves. That would mean work going to the contractors with the right connections instead of on merit or price. In general, ENH has avoided large-scale corruption until now. However, its recent behaviour gives cause for concern. According to reports, ENH has been complaining about its subsidiary, ENH Logistics, failing to win a contract on the liquefied natural gas (LNG) project being developed by ExxonMobil. It is not that the subsidiary was unfairly treated; it is just that one of the winning bidders, Bonatti of Italy, chose to bid without it. It would be unfortunate if ENH were to abuse its position in future to win control of a project, only to find that it didn’t have the capability to deliver it.
