Mozambique – A gas giant in the making

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Mozambique’s ambition to become a major exporter of natural gas is moving closer to realisation. The country has been producing a steady supply of onshore gas for both the domestic and export markets for over a decade now, but the passing of recent legislation has accelerated the process to evacuating untapped offshore reserves, which brings Mozambique one step closer to a gas-fuelled boom.

Natural gas has held a place in Mozambique’s energy mix and export plans for many years. The Temane gas field in the south of the country was first discovered in the late 1960s, and, together with neighbouring Pande, is estimated to contain around 100 billion cubic metres (bcm) of reserves, similar to the size of China’s first deepwater field in the South China Sea but a fraction of the Mozambican Rovuma Basin reserves.

South African energy firm Sasol has so far led the way in extracting gas from Mozambique’s onshore reserves and is currently producing around 4bcm of gas a year, the majority of which is piped to its Secunda facility in South Africa.

In 2010, US oil firm Anadarko discovered the first deepwater reserves of natural gas in the Rovuma Basin. Further exploration by Anadarko and Italian firm Eni has put Mozambique’s proven natural gas reserves at more than 150 trillion cubic feet which, according to the US Energy Information Agency, makes Mozambique the largest reserves of natural gas in sub-Saharan Africa.

Progress in the Rovuma Basin has been exciting.  Anadarko’s CEO has recently stated that commercial operations are possible by 2019. More conservative estimates place the development of the fields resulting in first gas in 2020 or 2021. Firms from China, Thailand, Indonesia, Japan, and UAE have reportedly signed up to purchase significant quantities of liquid natural gas (LNG) from Rovuma once it is operational. There are still many legal, technical and financial hurdles to be overcome, but the passage of a Decree Law in December (2014) furthers the legislative process that will allow for a final legal ruling on Mozambique’s entitlement to the gas and the percentages required to come onshore. Political and legal advancements like these give investors confidence to deploy essential capital into Mozambique’s economy in anticipation of gas-driven growth.

While Asia’s thirst for energy will help make the Rovuma Basin economically viable over its projected 30-year lifespan, neighbouring South Africa is likely to remain a large consumer of Mozambican gas for the foreseeable future.

South Africa’s Eskom, a parastatal entity that holds a near monopoly on domestic electricity distribution, continues to struggle with production of power and is expected to continue with a program of managed power cuts – ‘loadshedding’ – for many months to come as demand for power outstrips supply. Natural gas generation, partially dependent on Mozambique already, is a key part of the recovery plan which has been drawn up by the national government as more gas-fired power plants are developed.

In the meantime, many South African firms are turning to small-scale gas-powered generators for taking critical facilities ‘off-grid,’ as telecom provider MTN is doing with its data centers, for example. MTN is currently tripling the size of its generating capacity, and is using exclusively Mozambican gas for the purpose. While MTN’s project displays the small-scale scheme, the use of such gas-powered generation will likely supply a significant portion of Southern Africa, and Africa’s, power in the coming decades.

A recent World Bank report, Harnessing Africa’s Natural Gas, calculates that if consumed in high efficiency Combined Cycle Gas Turbine (CCGT) power plants, Mozambique’s reserves alone would be capable of supplying the entire existing capacity of sub-Saharan Africa for the next 30 years.

 

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