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Opportunities Outweigh Cost in Moza’s Gas Development

By Florival Mucave

 

 

 

 

 

 

 

For far too long, descriptions of Mozambique have contained some variation of the following: Mozambique one of the poorest Least Developed Countries in the world faces endemic droughts, floods and widespread poverty.

But we’re closer than ever now to changing that narrative, to being able to say: By strategically managing its vast natural gas resources, monetizing them, and harnessing them to industrialize the country and develop the private sector across the country, Mozambique is ushering in a new era of widespread economic growth and stability.

Unfortunately, not everyone agrees with this vision. A number of environmental organizations argue that the benefits of natural gas production in Mozambique are negligible and not worth the environmental costs.

Last month, NJ Ayuk, Executive Chairman and CEO of the African Energy Chamber, made a case for Mozambique developing its natural gas resources to build its economy. He criticized some environmental groups—UK-based Friends of the Earth in particular — for attempting to interfere with the UK government’s $1 billion funding commitment to Total’s Mozambique Liquified Natural Gas (LNG) Project. (Export credit agency UK Export Finance, had agreed to contribute funding because of the project’s potential to transform Mozambique’s budget and create jobs in the UK.)

Shortly after Ayuk released his piece, journalist Ilham Rawoot, who works for Friends of the Earth Mozambique (Justica Ambiental) and is the coordinator of the organization’s No to Gas! campaign, responded with an equally passionate opinion piece opposing his stance. She took issue with Mr. Ayuk’s commentary on environmentalists’ interference and his views on the potential benefits of LNG projects, asserting that Mozambique would be better off without natural gas production or LNG projects.

I respect Ms. Rawoot’s right to express her views on any matter.

I only wish that she, and others who are intent on saying “no to gas” in Mozambique, could start by making a thorough analysis on the pros and cons of Mozambique developing its vast natural gas reserves. The spillover and multiplyer effects in terms of socio-economic development, from training and capacity building, employment, Government revenue, industrialization through domestic gas utilization and energy security. Natural gas production truly represents an opportunity for Mozambicans, and there are solid reasons to believe that Mozambique can take the steps necessary to reap significant benefits from the three LNG projects currently being developed here: the TOTAL led Mozambique LNG project, valued at $23Billion; the ExxonMobil-led Rovuma project valued at $23.9Billion; and the $4.7Billion Coral Floating LNG project. But not only that, I’ve witnessed the positive impact of natural gas industries in other jurisdictions, from Trinidad and Tobago, Qatar, Nigeria, Australia, Norway and the United States of America. These are some of the reasons I’m confident when I say Mozambicans can shift our country’s trajectory for the better: We can transform our reality from poverty despite our resources to prosperity because of them.

We Need This Opportunity

From my perspective, we should welcome Mozambique’s natural gas industry and LNG projects, more importantly because there is empirical evidence demonstrating that in Mozambique, the tangible benefits resulting from LNG projects, outweigh by far any negative impact . Currently, economic opportunities in Mozambique are at a minimum, and natural gas production has the potential to simultaneously meet multiple pressing needs: job creation, capacity building, economic diversification, access to power and more importantly, poverty alleviation.

In order to have a sustainable economic development, through industrialization, Mozambique needs to increase access to power. The Mozambican Petroleum Law 21/2014, states that” Petroleum resources are assets whose proper exploitation can contribute significantly to national development”. This position is also echoed in the Mozambican Gas Masterplan, which suggests that the Government of Mozambique should develop natural resources in a manner that maximizes benefits to Mozambique’s society, in order to improve the quality of life of the people of Mozambique, while minimizing adverse social and environmental impacts.

So many of our struggles in Mozambique are rooted in our lack of reliable electricity: Only 29% of our population has access to power. In order to tackle the limited access to power by Mozambicans, the Petroleum Law 21/2014, incorporates a clause on domestic gas, according to which, 25 % of the natural gas produced in Mozambique must be used domestically. As a result of domestic gas obligations we are starting to see sizeable new investments in gas to power projects in Mozambique, such as the Ressano Garcia CTRG Project, the Kuvaninga project, the upcoming Temane Regional Electricity Project, which will include a 400-megawatt gas-fired power plant and the planned 250-megawatt electricity plant in the Nacala district that will be fueled by gas from the Rovuma LNG project.

Keep the Long Game in Mind

In her opinion piece, Ms. Rawoot states that few of the construction jobs for the TOTAL operated LNG plant have gone to locals, and she’s right. But to be fair, the LNG industry in Mozambique is in its infancy and we don’t yet have the trained labour force capable of participating in the oil & gas industry. As much as we would love to have a 70% majority of Mozambicans building everything, we still need international companies with the necessary skills to get the work done on time and on budget. Training is underway, but the experience and technical know-how are not there yet. However, that doesn’t mean we should kill the projects. We have to push forward, and at the same time, work on building local content laws that promote the inclusive participation of Mozambicans in the oil & gas industry. I hope we’ll see the western environmental community supporting these efforts. They can be a powerful and important voice on the importance of local content that promotes the inclusive and sustainable participation of Mozambicans in oil & gas projects.

When the Mozambican Oil and Gas Chamber and the African Energy Chamber talk about job creation from LNG projects, we’re not simply referring to construction jobs. We’re also talking about qualified and highly skilled jobs in the plants once they’re operational, jobs with local companies contracted by the plant, and also, jobs created as Mozambique harnesses its natural gas industry to industrialize its economy.

Gas Is Only the Beginning

The tourism industry in Southern Africa was growing exponentially before COVID-19 and will return to growth after the pandemic. Mozambique’s, natural gas can be a catalyzer for the growth of the tourism industry. The Mozambican Government has tourism as one of its economic pillars and although the tourism industry has been severely hurt by cyclones and COVID-19, its great potential remains untapped.

Despite its great potential, Mozambique’s tourism industry will not be able to grow and flourish without reliable power. Even with our pristine beaches, and some of the most beautiful islands in the world, only a few tourists will come if we don’t have reliable power. We want tourists to be able to enjoy our beautiful country, and we want a dynamic tourism sector that contributes to long-term economic growth and job creation. To achieve that, we need reliable power, we need infrastructure. Mozambique can achieve all of that with LNG production and revenue.

The Impact of Natural Gas Production in Mozambique on the Agriculture Industry

In its five-year economic plan, the Government of Mozambique indicated agriculture as its top priority. Currently, nearly 80% of our population works in the agricultural sector, and it generates about 25% of our GDP. However, due to low productivity levels, too many of our farmers still live in abject poverty. That can be changed, though. Simply by using fertilizers, farmers can enhance their yield by nearly 40%. While imported fertilizers are too expensive for the majority of our farmers, Mozambique can create a more affordable option. By building infrastructure to transform natural gas into nitrogenous fertilizers, Mozambique would help its farmers and also create local job opportunities. Mozambique could reduce significantly its imports of agricultural products from South Africa and become an affordable source of food for domestic consumption.

Natural Gas Monetization Is Doable

I understand why some are skeptical about Mozambique’s ability, and resolve to manage LNG revenues in a way that benefits our population. It’s true: The oil and gas industry hasn’t always been good for Africa’s people. We have seen our share of government rent-seeking and corruption in the African continent. We’ve also seen the impact of resource curse, even pre-resource curse. This is why the Mozambique Oil and Gas Chamber, the African Energy Chamber and other African Oil and Gas Organizations, are working together to change the gloomy narrative of the oil & gas industry in Africa. We are new African voices in the industry, committed to transparency, good governance, economic growth and sustainable development.

I am certain that Mozambique can benefit from the painful lessons some African petroleum-producing countries have learned up to now, from disastrous policies to successful diversification of their economies. We can also learn from positive examples, such as the twin-island of Trinidad and Tobago, which like Mozambique, has sizeable reserves of natural gas. Government initiatives in Trinidad and Tobago led to significant foreign investment into downstream, gas-based projects. And that, in turn, sparked increased activity in the construction, distribution, transport, and manufacturing sectors.

Looking at Emissions in Proportion

Naturally, protecting the environment is a major concern of Ms. Rawoot, Justica Ambiental, and similar organizations — and it’s very important to us.

Global electricity demand is expected to increase by 70% by 2035, gas fired generation almost doubling to facilitate this. It is also expected that the share of natural gas in the global energy mix will be higher than that of coal and oil by 2035.

The projected growth in the energy sector has to take into account the growing concerns regarding climate change. But, combating climate change effectively should not conflict with human progress and poverty alleviation.

With regards to natural gas, its scope in the reduction of carbon dioxide (CO2) emissions is significant, as natural gas with lower default carbon content of 15.3 Kg/GJ, is a cleaner option compared to coking coal (25.8 Kg/GJ) and crude oil (20 Kg/GJ). Natural gas is indeed an option for delivering industrial emission targets. In other words, natural gas is a bridging fuel by providing a low-carbon energy alternative to other fossil fuel sources.

What about the potential environmental impact of using natural gas to power in Africa?

It has been estimated that if we triple electricity consumption in sub-Saharan Africa, all with natural gas, we would produce the equivalent of 0.62% of annual global emissions — less than the average yearly global increase over the last decade.

In Mozambique, given our natural propensity for cyclones and other natural disasters, protecting our natural habitats and wildlife as well as keep the planet healthy for future generations has long been a priority, and will remain one. However, rather than discarding LNG projects, we should be working together to find a way to develop them in an environmentally responsible manner.

Mozambicans do have a say in the Afungi Relocation Process

In her opinion piece, Ms. Rawoot argues that the TOTAL operated Moambique LNG plant not only represents an environmental threat, but also one to local people and communities. TOTAL, she writes, took the homes of 556 families for their LNG plant project and failed to compensate them fairly. Those claims are unfounded. This is a matter that was comprehensively discussed between the civil society and the Mozambican Government. Currently, the government is engaged in productive conversations with citizens and businesses on this matter. Furthermore, the oil and gas companies in Mozambique have been very sensitive to issues that impact communities and have encouraged communities to be active in the land acquisition process, a process that includes relocation, compensation, restoration of livelihoods and the creation of a community development fund for resettlement-affected communities. Additionally, through a non-government organization (NGO), legal assistance has been provided to households signing compensation and resettlement agreements.

Let’s Remove a Motivator for Violence

I won’t deny Ms. Rawoot’s point that Mozambique has struggles, including armed conflict and terrorist attacks. Insurgency in Cabo-Delgado is a fact and there is no simple solution to this dilemma. I do however believe that our government in partnership with the civil society and international community will reach a durable peaceful solution, a sine qua non condition for the viable exploitation of natural gas in Cabo-Delgado.

I also agree with journalist Oscar Kimanuka of Rwanda, who recently noted that unemployment in Northern Mozambique may be a key factor for youths to join the extremists.

It seems logical, then, that creating employment opportunities could, at least, make it more difficult for extremist militant groups and terrorists to recruit our young people. Therefore, harnessing our natural gas resources to grow our economy is a sustainable solution.

Mozambicans Deserve Chance to Help Themselves

I understand that Mozambique has its share of complex challenges, and natural gas isn’t a perfect solution. At the same time, it is preposterous for Ms. Rawoot to suggest that Mozambique must jeopardize a projected LNG investment of approximately $55Billion, equivalent to four times the size of the country’s GDP and forgo Government revenues over the next 25 years that are estimated to increase by US$ 4-5 billion per annum.

Mozambique cannot afford to continue being a country where our Government budget depends on international donor’s good will. We want Mozambicans to have the dignity of work and of building an inclusive and respectable nation. Harnessing natural gas to address poverty alleviation is a suitable solution.

Florival Mucave is Executive Chairman, Mozambique Oil and Gas Chamber (http://EnergyChamber.org)

 


Natural Gas Base Price Inches Up in Nigeria, according to the PIB

By Toyin Akinosho

The domestic base price, the price at which Nigerian gas producers are to sell to Power Plants, will be $3.2 per Million British Thermal Units (MMBtu), beginning from January 1, 2021, if the Petroleum Industry Bill (PIB) is passed into law in its current form.

But the price at which the gas-based industry, comprising companies which produce methanol, fertilizer (urea, ammonia), polypropylene, etc., will purchase natural gas, can be as low as $1.5 per MMbtu, the incoming law says. That price is special and it is calculated from a formula.

Gas users outside the power sector and the gas-based industry will pay at least $0.5 higher than $3.2 per MMbtu, and their cost of purchase will depend on negotiations with their suppliers.

The domestic base price -$3.2per MMBtu- which is specified in the third schedule of the bill, currently being debated at the Nigerian National Assembly, shall be increased every year by $ 0.05 per MMBtu until 2037, when a price of $ 4.00 per MMBtu will apply for that year and future years.

The Midstream and Downstream Regulatory Authority, “may, by regulations, change the domestic base price and the yearly increase) to reflect changed market conditions and supply frameworks”, says the bill, submitted two weeks ago by President Muhammadu Buhari.

“The objective is to establish a fully functioning free market in natural gas for domestic supplies. This is to be achieved through the voluntary supplies. Where insufficient voluntary supplies are occurring, the Authority may increase the domestic base price and, or the yearly increases. At the same time, the Authority shall monitor the gas prices in other major emerging countries and ensure that Nigeria continuous to have a price level for natural gas that is less than the average of these emerging countries in order to promote the non-oil sectors in the Nigerian economy”.

Timipre Sylva, Minister of State for Petroleum, had given hint of the gas pricing framework last August during a conversation with the Nigeran Association of Petroleum Exlorationists (NAPE). The bill, he explained, “will establish a gas base price that is higher than current levels (The current domestic base price is $2.5 er MMbtu)  for producers and this base price will increase over time”.

Sylva said: “This price level should be sufficiently attractive to increase gas production significantly since this gas price will be comparable with gas prices in other emerging economies with considerable gas production.

“The price will be independent of all gas prices for LNG export and is therefore a stable basis for enhanced domestic gas development, regardless of international oil or energy development”.

 


Morocco’s $9/MMBtu Gas Price Looks Good on Paper

“Gas has been a growing component of Morocco’s power generation mix”, says Chariot Oil&Gas, the London listed minnow who is looking to develop a gas field in the country.

“Attractive gas prices are established for power generation and industry”, the company notes.

The power sector pays $8 per million British thermal units (MMBtu), which roughly equates a thousand cubic feet (Mscf). It the sort of price that gas producers dream about, especially at this time when international prices have shrunk.

It gets even better.

Gas prices  for industry are in the range of $9-11/MMBtu.

Rabat is pushing natural gas as part of the national strategy to reduce imports and transition to lower carbon energy.

A key problem is that coal significantly dominates the energy scene. Although Morocco imports most of its energy needs, facilities for gas commercialization are underutilized. The installed gas fired electricity capacity is 850MW using around 100Million standard cubic feet of gas per day. Natural gas supplies 15% of the country’s electricity. But the Moroccan government isn’t looking at gas as the prime energy fuel in the forseeable future. The country, instead, talks up renewables.

Chariot keeps scouting for investors to develop the Anchois gas find. We are “continuing to engage with off-takers and develop alternative commercialisation routes for gas and liquids”, the company says in its latest update.

 

 

 


Volkswagen Pushes for Incentives to Join Egypt’s Autogas Plan

By Toyin Akinosho, Publisher

German car maker Volkswagen is asking for tax breaks and localization incentives before it agrees to produce natural gas-powered vehicles in Egypt.

It wants the opportunity to bring in foreign staff to work on the local assembly lines it would use to manufacture the vehicles in North Africa’s largest economy.

If the government gives the nod, the company will produce natural gas -powered versions of Crafter and Caddy 5 vans for the Egyptian market.

Volkswagen has been more enthusiastic to be part of Egypt’s Autogas plan than any other automaker. It announced last year that it was planning to invest in the countrywide effort. Japanese car making giants Toyota and Nissan have also expressed interest, but Nissan has withdrawn, while Toyota is, like Volkswagen, pushing for incentives. Toyota’s plan is to manufacture 240,000 minibuses running on dual fired engines. The Russian car maker Skoda is not in on the local assembly plan. But natural gas-powered versions of its Octavia and Rapid models will be imported into Egypt by local agents.

More than any African country, Egypt is big on domestic use of its natural gas deposits, the third largest in Africa. It holds 76Trillion cubic feet of reserves, less than half of either Nigeria’s or Algeria’s, but it produced 2.3Trillion cubic feet from those tanks in 2019, way higher than Nigeria’s production of 1.74Trillion cubic feet and, more importantly, over 80% of it was for domestic consumption, primarily through the country’s 40,000MWof gas fired electricity supply.

Egypt’s Autogas plan is to convert two million vehicles into dual fired engines that could be fueled by both gasoline and natural gas in the next three years.

Vehice licencing will be conditional on cars being equipped with natural gas engines.

Through the initiative, owners of vehicles over 20 years old will receive low interest loans through Egypt’s MSME Development Agency to purchase new dual-fueled vehicle. Owners of newer vehicles can access zero interest finance to outfit them with new engines.

 

 


Cairo Based East Mediterranean Gas Forum Finally takes Off

By Toyin Akinosho, Publisher

Six of the seven founding states of the Eastern Mediterranean Gas Forum signed its charter September 22, 2020, marking the official commencement of the body.

The East Mediterranean region has flashed brightly on the global hydrocarbon map in the last ten years, with the discoveries and development of over 50 Trillion of cubic feet of gas off Egypt (Zohr, 30Tcf, 2015, discovered by ENI); Israel (Leviathan, 22Tcf, 2010, discovered by Noble Energy) and Cyprus (Aphrodite, 5Tcf, 2011, discovered by Noble Energy).

Egypt, Greece, Cyprus, Italy, Israel, Jordan, and Palestine have all signed. Palestine was absent and will sign later. France has formally requested to be a member and the United States has registered intention to be a permanent observer. While Turkey is keen, its politics has appeared to rile up some members.

Turkey has been exploring for hydrocarbons in contested areas of the eastern Mediterranean, Cyprus and Greece have argued.

For Egypt, whose capital Cairo is the forum’s headquarters, it was a major step in the ambition to be the region’s energy hub.

The organization will serve as a market platform for natural gas producers, consumers, and transit countries in the region to develop existing resources and develop the infrastructure for future exploitation, in addition to regulating natural gas policies in the region that protect the rights of member states to preserve their resources, the signatories said in a joint statement after the online ceremony.

Member states will exchange information and seismic data studies on potential gas wells and delineate new gas finds that straddle maritime borders. Member states could even get preferential rates on each other’s gas supplies, as well as preferential access to liquefaction facilities, he said.

The forum had a launch meeting in 2019, during which the founding members agreed to move ahead with creating a regional market to develop the eastern Mediterranean’s estimated 122 Trillion cubic feet of gas reserves.

 


Egypt Faces Headwinds to Mass Autogas Conversion

By Mohammed Jetutu, in Cairo

Egypt is facing considerable obstacle to its plan to convert close to Two Million Vehicles into dual fired engines that could be fueled by both gasoline and natural gas in the next three years.

Japanese auto companies Nissan, and Toyota, two key early supporters of the plan, are no longer as enthusiastic as they once were.

Nissan has withdrawn. Toyota is playing hardball, asking for more incentives.

The two companies were to convert thousands of minibuses to run on dual fired engines.

Toyota had been far more supportive of the project, which targets 1.8 Million vehicles. Toyota had tentatively agreed it would manufacture 240,000 minibuses running on dual fired engines.

Toyota is now requesting for customs and VAT exemptions from the authorities and the negotiations are dragging out.

Apart from Toyota and Nissan, there are two local distributors of minibuses; Al Amal and Modern Motors. They are still fully engaged with the project.

Ultimately, President Abdel Fatah el-Sisi has said, Vehice licencing will be conditional on cars being equipped with natural gas engines.

Through the initiative, owners of vehicles over 20 years old will receive low interest loans through MSME Development Agency to purchase new dual-fueled vehicle. Owners of newer vehicles can access zero interest finance to outfit them with new engines

In the meantime, Egypt’s Mass Transit Authority (MTA) says it would work with the Military Production Ministry to convert 300 buses to run on natural gas as a first phase, The MTA plans to convert the engines on its entire 3,500-bus fleet within two years.

The national conversion project follows up on a 2009 scheme that sought to replace 70,000 old taxicabs with zero- interest loan new vehicles fitted with dual fuel engines

Although the programme fits into the standard Egyptian government’s effort to utilize natural gas in the country, officials say that this scheme is targeted at ameliorating the cost of living. Whereas a litre of 80-octane gasoline, (the cheapest) fetches $0.39, the same volume of natural gas can be purchased for $0.21, at any of Egypt’s filling stations.

 


Nigeria to Continue Price Control of Natural Gas in the New PIB, Minister Says

By Fred Akanni, Editor in Chief

Producers and consumers of natural gas alike can agree on gas prices on a willing seller willing buyer basis, the Nigerian Minister of State for Petroleum has said.

“However special protections are built in to ensure supply to wholesale customers in strategic sectors which are the power sector, gas-based industries and commercial sectors with significant offtake possibilities”, he declared.

Timipre Sylva told a webinar hosted by the Nigerian Association of Petroleum Explorationists (NAPE) last weekend that the proposed Petroleum Industry Bill (PIB), expected to be engaged at the National Assembly within a few weeks, “establishes an attractive fiscal framework for gas that allows low royalty and corporate income tax and a variety of small taxes and levies.”

The bill, he explained, “will establish a gas base price that is higher than current levels for producers and this base price will increase over time. This price level should be sufficiently attractive to increase gas production significantly since this gas price will be comparable with gas prices in other emerging economies with considerable gas production.

“The price will be independent of all gas prices for LNG export and is therefore a stable basis for enhanced domestic gas development, regardless of international oil or energy development”.

Sylva said the proposed bill also will establish a flexible and comprehensive framework for midstream gas development. “Gas pipelines and gas processing plants can be built on own account of the investor. In addition, a midstream gas infrastructure fund Is being proposed in the PIB with the narrow focus of unleashing private investment to process gas and transport by pipelines”.

The webinar was part of the series of engagement by the 7,000-member strong NAPE, the largest umbrella group of technical professionals in Africa, with industry regulators and policy makers. NAPE has hosted, since April, Mele Kyari, Group Managing Director of the state hydrocarbon company NNPC, Sarki Auwallu, Chief Executive Officer Department of Petroleum Resources, the regulatory agency and Timipre Sylva, Minister of State For Petroleum Resources.

 


Cameroon Exported 6Billion Cubic Feet of LNG in Five Months

Cameroon shipped 158,000Tons of liquefied natural gas in the first five months of 2020, according to the National Hydrocarbons Corporation Société Nationale des Hydrocarbures (SNH) du Cameroun.

Converted to standard cubic feet, the volume is 6.1Billion cubic feet of gas, or 6.2Trillon British Thermal Units (BTU).

The molecules were exported in seven cargoes to markets in Asia, notably India, China, and Taiwan, an SNH report indicated.

Since 2018, Cameroon has been producing LNG from the Sanaga South field, northwest of the coastal town of Kribi in the northern part of the Douala basin.

The gas is liquefied in a floating facility, Hilli Episeyo, located off Kribi. The capacity is 1.2Million tonnes per year.

Small as it is, Hilli Episeyo Floating LNG project is the first floating natural gas liquefaction plant in the world to be built as a result of the conversion of an LNG carrier.

The project is operated by Perenco, the French-British independent, with the state hydrocarbon company as partner. The sole offtaker is Gazprom Marketing & Trading, a unit of Russian energy giant Gazprom.

Output increased in 2019 compared with 2018. In 2019 Cameroon shipped 19 loads of LNG (7 more than in 2018) to Asia.

 

 


High Rainfalls Crimp Natural Gas Demand in Tanzania

Natural gas demand by power plants in Tanzania were impacted by sustained and significant rainfalls that enabled the Tanzania Electricity Supply Company (TANESCO) to operate its hydro facilities at high utilization rates, Orca Petroleum has reported.

The country is now entering the dry season and gas demand is expected to increase for the remainder of the year.

But the state energy firm has remained a diligent customer to its gas suppliers.

“Despite the lower demand for gas from the power sector, TANESCO has continued to pay back its arrears during the first six months of the year”, Orca Petroleum says in a release.

Orca Petroleum produces natural gas from the Songo Songo gas field on Songo Songo Island onshore Tanzania. It is the biggest single supplier to the Tanzanian domestic gas market.

The company says it has carefully managed an operational team that has enabled it to maintain production on Songo Songo Island has enabled throughout the COVID-19 pandemic.

In seond quarter 2020, Orca’s production averaged around 85MMscf/d, comprising additional gas sales, which is what the company is entitled to earn revenue from and protected gas, which is what the Tanzanian Petroleum Development Company (TPDC) is assigned in the contract.


Mozambique: Shared Value, Local Partnerships and The Future of Work

By Mario Fernades, Deloitte

Two LNG projects are currently under construction in Mozambique.

Several others are imminent.

The proposed ‘LNG System’ in the country will effectively be rolled out in four stages.

The Coral FLNG, operated by ENI, sanctioned in 2017, will produce about 3.4Million tonnes per annum by 2024.

The TOTAL operated Mozambique LNG in Area 1, sanctioned mid-2019, will be producing 12.8MMTPA  by 2026.

Final Investment Decisions FID has been delayed for the ExxonMobil led Area 4, but the project is aiming to produce about 15.2Million tonnes per annum.

The projects for Phase 2 trains have not yet been decided, but the operators are starting to think about them and they could potentially add another 30Million tonnes per annum, with FID probably around about 2024. So, of what is potentially on the cards and being planned is about 31Million tonnes per annum. This is enormous. This could make Mozambique the fourth largest in the world. Qatar which is the largest, is producing about 77Million tonnes per annum and it took them 14 years and it brought tremendous economic benefits for the country. The EPC contractors for Area 1 are largely led by Saipem, Chiyoda and McDermott.  Area 4 EPCs include TechniqFMC, JGC and Fluor.

Opportunities for Local Investors and Their Partners-, TOTAL for Area 1 is targeting to spend about $2.5Billion for Mozambican registered or owned companies. It allows for foreign investors who want to come into the country and invest with local players or establish operations in the country. Area 1 project has already spent about $850Million over the last five years. What’s important are the priority industries that investors could look forward to considering.

Some of the lower values but highly mature markets where you’ll see some of the local players in Mozambique get involved because it doesn’t have a lot of technical complexities are areas like food and water supply, accounting services and general consulting. Where we believe this need to evolve to and it’s the opportunities for foreign direct investments, is higher value and more mature investments including Civil construction services, transport and logistics, mechanical and electrical instrumentation, IT Systems, Pipes, Vessels, Metallurgy and welding activities. This is where the real value is going to be developed over the next few years and represents significant investment opportunities. Given the low maturity of some of the industries in the country, you’d probably see in the future, a lot of collaboration between the government, operators in EPCs, local companies, the business associations in Mozambique, as well as any foreign investors who are interested in investing in some of these value chains. Key value chains and opportunities like civil construction, are not well understood and there will be a need to identify the gaps and opportunities for business out there, both local and foreign. Another thing is what is being done currently by these big operators and the EPC’s to close the gap on the skills and the local business in Mozambique. There are plans to establish the Enterprise Development Centres (EDCs) where the objective is to build capabilities, expose these local companies to international OEMs and expertise promote collaboration and certification which is a big requirement from a lot of these big capital projects, that these companies have the right levels of certification in order to provide services. Critical to sustaining the value and the expectation that everyone has of these projects, is to drive the concept of shared value. This is building on lessons from the past in the country. The concept of “Shared value” is how can both shareholders who looking for a financial return on their investments, government stakeholders are looking for a return in the country and citizens who live in the remote areas of where this gas was found or in the country itself, achieve the kind of benefits that they’re looking for. It is complex to match and balance these expectations. Very often we tend to see that companies tend to do the “pickbox compliance” approach but we believe you have to go beyond some of these. It’s important that these companies, governments and so forth create a platform in which collaboration can happen. The government creates the right policy around employment and procurement to ensure that companies are incentivized to invest in local procurement and so forth.

From the operators’ perspectives and the companies building the infrastructure, it’s important to be top of mind to be relevant to these communities and to really develop processes to effectively measure the social returns that these stakeholders are looking for. It is easy to measure the financial return, but quite another thing to measure the social economic return in a holistic manner.

The Future of Work -Challenges like COVID-19 are really disrupting the way projects are executed, and are forcing companies to plan on how they would operate in this new normal. Companies need to rethink how work would change in this new normal. For example, how do you enable effective remote supervision? It’s one thing to work in a desktop type job, it’s quite another to build the infrastructure of the magnitude that we’re talking. The same restrictions that we’re all facing in challenges like COVID-19 are also being felt in large projects like this. How do you define new roles and responsibilities for the workforce that is there? Probably you don’t need to have as many people on site and you have to adopt concepts of social distancing, how do you redefine these roles? What tools and technologies will you need to enable this kind of new reality of the future of work? Companies will have to decide what tools and policies, what labour policies will be put in place in order to enable these future work teams? Lastly, I want to talk with you about innovation. We think that digital is going to be a key enabler here. Concepts that we all thought were very futuristic are now a reality and being thought through as real tools to ensure that the project continues to be delivered on budget and as scheduled. Another thing we’re trying to see as well is a lot of these safety analytics and how persons are wearing safety gear, helmets and video imaging which detects if a person is wearing protective gear or not, and then take corrective action. Another big innovation area that we’re starting to see is around “Sentiment Analysis”, which is all about how to use technology to collect and measure the pulse of your workforce of your communities that are impacted by the project and quickly identify and innovate with them to understand what their needs are so that you can quickly adapt your actions to that. Sentiment Analysis is all about measuring the pulse of your stakeholders.

Mario Fernades- Partner at Deloitte Consulting, based in Mozambique, heading up the practice there. Deloitte offers Consulting, Risk Advisory, Taxation, Audit & Assurance and Green Dot(Future of Energy and Goods). Fernades spoke at an Africa Oil Week produced webinar panel including Paul Eardley-Taylor, head of Oil and Gas Southern Africa, Standard Bank,and Trey (Lyman) Armstrong, MD, Project and Structured Finance, US EXIM Bank. It was moderated by Dexter Wang, Asia Market Engagement Partner at S&P Global Platts. This is an abridged version of the conversation, monitored in Lagos, Nigeria and transcribed by Foluso Ogunsan and Akpelu Paul Kelechi.

 

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