Chinese Join Planned $6Bn Mozambique Gas Pipe
South African and Mozambican investors have signed a cooperation agreement with the pipeline-building subsidiary of China National Petroleum Corporation (CNPC) that envisages construction of a 2,600 kilometre, large-diameter gas pipeline costing $6bn. The pipeline is planned to connect the reserves of northern Mozambique’s giant offshore Rovuma basin to South Africa’s heavily coal-dependent industrial heartland of Gauteng.
The partners in the "African Renaissance Gas Pipeline" project said it would deliver gas to key towns in all provinces of Mozambique, boosting its economy, but a lot of work and support-building remains to be done before the project might take shape – especially with financiers and offshore gas owners.
London-AIM and South Africa-listed SacOil – which is 42.14%-owned by leading South African pension fund Public Investment Corporation (PIC) and 27.02% by Standard Bank – announced the cooperation agreement on March 1. Other signatories are state oil and gas company ENH and private sector consortium Profin Consulting, both from Mozambique, and CNPC-owned China Petroleum Pipeline Bureau (CPP), which laid many of China’s pipelines including the 4000km-plus ‘West-East’ gas pipe from the Turkmen border, plus gas pipelines in Libya and Tanzania, and a plethora of oil pipes in Sudan, Chad, offshore Nigeria, Kazakhstan and Russia.
“The cooperation agreement assures financing commitments required for the pre-investment and engineering studies and the speedy and effective construction and implementation of the project,” SacOil add. It also said that it supersedes a joint development agreement signed on December 8 2014 and offers “bankability by assuring a solid investor group drawn from China, Mozambique and South Africa.” In particular it noted that Chinese CPP “brings a wealth of world class construction, debt and equity financing expertise to the project.”
The ambitious project could offer an additional way to monetise Rovuma gas. Eni alone has discovered 85tn ft3 of gas in the Rovuma Basin; last week it secured approval to develop the first 5tn ft3 of that for the 3.4mn tons/yr Coral floating LNG project, although the FID is pending. Eni and US firm Anadarko, which has its own offshore gas finds, also have preliminary plans for the long-term development of up to 10 onshore LNG plants, each of 5mn tons/yr, post-2020. As yet though, there’s no sign from either company – or partners except for ENH – whether they would back such a pipeline.
A spokesman for SacOil told Natural Gas Africa: “Discussions are ongoing with other gas owners.” It did not say whether its pipe proposal might dovetail into the existing 865km gas pipe linking the Temane field in southern Mozambique to South Africa’s Gauteng region, run by South African oil firm Sasol. Sasol also declined to comment to NGA.
SacOil said that its owner “PIC intends to become a party to the joint venture agreement when it is concluded” adding “the joint venture company will develop and manage all the initial activities of the project including requisite pre-investment studies, which will be performed by CPP… CPP will also be the Lead Arranger and shall be responsible for procuring the debt-financing equal to 70% of the total project cost from Chinese financial institutions.”
The rationale for the $6bn pipe project, according to SacOil, is to make energy affordable to a greater proportion of the population, promote clean energy and a lower carbon footprint, to reduce oil bills and carbon tax in South Africa and other economies in the region. But its spokesman said it was too soon to discuss the pipeline’s planned capacity in bn m3/yr or expected offtake in either country, just as it would be too early to give a target date for any final investment decision.
Johannesburg-based SacOil has modest oil and gas exploration assets in DR Congo, Malawi and Botswana, and a 100% interest in the 1,000 b/d Lagia oilfield in Sinai, Egypt, due to start up this month. It also aims to develop an oil storage terminal on Bioko island in Equatorial Guinea.