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.