High Commission of the Republic of Mozambique

European Commission considers classifying natural gas as “green”

London, 4 Jan (AIM) – The European Commission has opened consultations on whether natural gas and nuclear power projects should be considered as “green” investments, in a move that could have major implications for the development of Mozambique’s hydrocarbon industry.

The Commission has drawn up a draft text of a “Taxonomy Complementary Delegated Act” covering certain gas and nuclear activities, which, if adopted later this month, will guide and mobilise public and private investment in projects to promote climate neutrality over the next thirty years.

The proposed taxonomy will classify projects as being green, if they help Europe to move away from the use of coal and other high carbon-emitting energy sources. According to a statement from the European Commission on 1 January, it considers that there is “a role for natural gas and nuclear as a means to facilitate the transition towards a predominantly renewable-based future”.

Under the proposal, the classification would be under very specific conditions. For example, the gas must come from renewable sources or have low emissions by 2035.

The Commission has asked two expert groups to give their opinion on the draft by 12 January and, if the opinion is favourable, the proposals will be agreed to later this month. After that, the European Parliament and the European Council will have four months to scrutinise and decide whether the proposal will come into force.

The move was criticised by the head of the Green group in the European Parliament, Philippe Lamberts, who argued that by including gas and nuclear power in the draft regulation, “the Commission risks jeopardising the credibility of the EU's role as a leading marketplace for sustainable finance”.

He added that “by calling gas investments green until 2030, Europe sends the wrong signal to our partners in the world and endangers to lock us in fossils much longer beyond 2030”.

According to figures from the European Commission, in 2019 just under 20 per cent of energy consumed in the European Union was generated from renewable sources. In addition, by their very nature, solar and wind power are not always available and the grid-scale battery storage industry is still in its infancy.

As a result, relying on scaling up renewables is unlikely to fully meet Europe’s energy needs in the short to medium term. In another complication, on 31 December Germany shut down three of its six nuclear power stations with the remaining power plants due to close this year. Another factor is that over a third of Europe’s natural gas comes from Russia and in 2021 the state-owned Russian company Gazprom refused to supply any gas additional to that contractually required. Tensions between Europe and Russia are likely to continue for the foreseeable future.

Under these conditions, other supplies of natural gas will likely be required and Mozambique could meet much of this. Enormous quantities of natural gas have been found off the coast of the northern province of Cabo Delgado and projects are currently being developed for its use domestically and for export.

One project, Coral South, where the Italian company ENI is the operator, is due to begin production of Liquefied Natural Gas (LNG) on its floating platform later this year. The Coral South gas field is estimated to contain about 16 trillion cubic feet (TCFs) of gas and the entire production of 3.4 million metric tonnes of LNG per year has already been secured by British Petroleum (BP).

The other major venture currently underway is the Mozambique LNG Project using gas from Rovuma Basin Offshore Area One. The French oil and gas company, Total, is the operator with its partners coming from Japan, India, Thailand, and Mozambique. When operational, the project will produce 12.88 million tonnes of LNG per year for domestic consumption and export.

A third development, the Rovuma LNG Project, will use gas from offshore Area Four to produce 15 million tonnes of LNG a year. However, the operator, ExxonMobil, has not yet taken its final investment decision.

The projects have the gas reserves required to expand the output of LNG at a later date should the market conditions be favourable.

These sources of natural gas could play a vital role in stabilising global prices and securing supplies in Europe and other markets. In addition, they will create the conditions for the development of Mozambique’s economy and enable the country to mitigate the effects of climate change caused by carbon emissions during the 20th and 21st Centuries which took place predominantly outside of Africa.

However, bringing the projects to fruition and later expanding them requires enormous private and public investments and financial institutions require certainty that investments will be recouped. The European Union’s draft Delegated Act is a move in this direction. According to the African Energy Chamber, a South African based group linked to the energy industry, “this new proposal will pave the way for new European investments in natural gas in Africa and will therefore allow Europe to unlock billions of euros in finance and sustainable energy funds to support gas as a transitional energy source”.

It added, “Africa’s call for a just and inclusive energy transition has been answered through the European Union’s landmark proposal to label natural gas as a “green” energy source. Historically, Africa has always fought for sustainable development because we know, first-hand, the ravaging effects that even minute changes in climate can have on the continent and its populations”.

It stressed that “to develop sustainably, Africa must first industrialise itself. It must have the same opportunities as Europe and other western countries”.