(EnergyAsia, September 19 2012, Wednesday) — Mozambique, one of the world’s poorest countries, is in a strong position to cash in on its rich natural gas reserves, but it will need to first invest heavily in strengthening its legal system and building its infrastructure.

According to natural resources consulting firm GlobalData, the East African country has made a series of discoveries in the Rovuma Basin over the last three years that could turn it into a major liquefied natural gas (LNG) exporter.

Mozambique’s geographical location means that it can produce LNG for export to both Asian and European markets. As one of the Africa’s fastest developing energy producers, the country has set its sights on attracting US$50 billion worth of investments by 2020.

But like most resource-rich states, the country faces some challenges with political stability and protection of investors’ rights.

Mozambique’s infrastructure remains in a poor state and has yet to be restored some 20 years after the end of a devastating civil war. Despite the lure of its natural resources, foreign companies remain wary about the country’s inherent political instability and lack of legal protection for private capital.

Mozambique’s population comprises a large unskilled and uneducated workforce while the government has capped the employment of expatriates to 10% of a company’s total workforce. The development and operation of LNG plants and terminals would require skilled labour.

The government has also imposed tough regulations on the movement of foreign exchange and the condition that half of export sales proceeds be converted to the local currency, said GlobalData.