Africa Market Intelligence

Mozambique presents an excellent opportunity for the local supply of stainless steel into various ventures that form part of the $60-Billion oil and gas projects. Unfortunately, the project was halted in the first half of 2021 due to Islamist militant insurgencies in the far north of the country, in the provinces where the gas projects were located…

Mozambique’s gas and oil fields have long been touted as a fertile breeding ground for new business opportunities in the form of project participation for South Africa stainless steel manufacturers, distributors, and fabricators.

The good news is that despite the stalling of this project due to insurgency attacks, Italian energy services group Saipem SPMI.MI has now said it expects a major LNG project in Mozambique to restart around mid-2022 after it was put on hold this year for safety reasons.

This follows French energy Group Total declaring a force majeure on its $20 billion liquefied natural gas project in Mozambique Late in April 2021following insurgent attacks.

A LOOK BACK & CURRENT CONTEXT…

In the first half of the second millennium A.D., northern Mozambican port towns were frequented by traders from Somalia, Ethiopia, Egypt, Arabia, Persia, and India. The Portuguese were able to wrestle much of the coastal trade from Arab Muslims.

Portugal did not relinquish control of  Mozambique until 1975. Following that, large-scale emigration, economic dependence on South Africa, a severe drought, and a prolonged civil war hindered the country’s development until the mid-1990s.

The ruling Front for the Liberation of Mozambique (FRELIMO) party formally abandoned Marxism in 1989, and a new constitution the following year provided for multiparty elections and a free market economy.

An UN- negotiated peace agreement between FRELIMO and rebel Mozambique National Resistance (RENAMO) forces ended the fighting in 1992. In 2004, Mozambique underwent a delicate transition as Joaquim CHISSANO
stepped down after 18 years in office.

His elected successor, Armando GUEBUZA, served two terms and then passed executive power to Filipe NYUSI in 2015. RENAMO’s residual armed forces intermittently engaged in a low-level insurgency after 2012, but a late December 2016 ceasefire eventually led to the two sides signing a comprehensive peace deal in August 2019.

In October 2019, election results were challenged by Western observers and civil society as being problematic, resulting in resounding wins for NYUSI and FRELIMO across the country. Since October 2017, violent extremists - an official ISIS media outlet recognised as ISIS’s network in Mozambique for the first time in June 2019 - have been conducting attacks against civilians and security services in the northern province of Cabo Delgado.

PROJECT UPDATES

The front-end engineering design for the Beluluane Gas Company liquified natural gas import terminal project - being developed by Southern African energy group Gigajoule, French energy multinational Total Energies, and Mozambican natural gas distributor Matola Gas Company (MGC) is also complete, adding another key milestone to the project. Mozambique’s state owned gas company ENH, a shareholder in both MGC and Rompco - the gas pipeline that runs from Mozambique to the industrial heartland of South Africa - has a share in the project.

The project will meet the growing energy demand in both Mozambique and South Africa by utilising MGCs existing gas pipeline network that will be upgraded to increase its capacity to supply the full capacity of Rompco ensuring natural gas is available for industries and power generation projects.

Gigajoule CEO Jurie Swart explains that the Government of Mozambique awarded the LNG import concession to BGC and approved the  construction of a new, 28-inch pipeline linking the terminal to the existing MGC transmission network two years ago, after years of pre-feasibility  studies. The concession includes the operation of a permanently moored floating storage regasification unit (FSRU), marine infrastructure, and a  new high-pressure gas pipeline.

The project is critical for energy security in the region. There is insufficient natural gas to meet the current demand for market growth and the power generation needs in Southern Africa, which is set to worsen as output from the Pande and Temane gas fields start to decline within the next three to five years. This shortage has been worsened by the urgent need to transition away from coal as a fuel source and to complement the volatility of renewables.

GAS INFRASTRUCTURE

The gas infrastructure will connect the FSRU to a new 2 000 MW gas-fired power plant in Matola, Mozambique, which is well situated on the Southern African grid and able to supply industries with cleaner, dispatchable power at a market competitive tariff.

The project includes an onshore LNG Truck Loading Facility (TLF) capable of supplying customers by road transport who are not situated close to the pipeline distribution network. Preliminary studies show that the TLF can compete with alternative fuels for gas transported up to 1 000 km from Matola.

A final investment decision is expected in mid-2022, depending on the level of off-take secured at that stage. The FEED has now been completed and approved; final environmental reports compiled; and all development processes, licenses, and approvals are on track, while commercial  engagements with the market have already kicked off with first commitments signed,” remarks Swart.

Finally, he stresses that there has been no impact on the project as a result of the unrest in the north of Mozambique, explaining that the BGC  terminal will be supplied from Total Energies’ global LNG portfolio, meaning that there will be no supply challenges once the LNG terminal is online.

The project to drill the six wells which will feed the Floating Liquefied Natural Gas Platform in Area 4, in the deep waters of the Rovuma Basin, Cabo Delgado, is in its final stages.

With liquefied natural gas (LNG) expected to grow exponentially over the next five years, owing to the global drive to greener power generation, diverse consulting service provider Synergy Oil & Gas Consulting & Training senior energy manager Ismaeel Fataar says now is the time to upskill workers to keep up with international skills and technological developments.

“South Africa currently relies heavily on Mozambique for the supply of LNG, but with training and the correct infrastructure developments in the sector, South Africa can attain supply independence.”

Using LNG, which is a clean, cost effective and readily available product, will help South Africa’s efforts at a just energy transition, he adds. However, Fataar mentions that the LNG industry is new and has no concrete standards and accreditations, which “needs to be reviewed.

(Sources: Reuters and Engineering News)