SACOIL, THE PIC AND IGEPE SIGN A JOINT DEVELOPMENT AGREEMENT
Further to the announcement dated 31 March 2014, SacOil, the Public Investment Corporation SOC Limited (“PIC”) and The Instituto de Gestão das Participações do Estado (“IGEPE”) (collectively “the JDA Partners”) have signed a Joint Development Agreement (“JDA”) dated 03 December 2014 to evaluate the technical and commercial feasibility of a transnational terrestrial gas pipeline and distribution facility that will carry natural gas from Mozambique’s Rovuma fields into South Africa, with off-takes to other neighbouring Southern African Development Community (“SADC”) countries (“the Project”).
Salient features of the JDA
Under the JDA, whose effective date is 03 December 2014, the JDA Partners will work together to evaluate the viability of the Project. The feasibility studies will cover engineering, market development, gas purchasing, economic, financial, technical and commercial risk profiles as well as environmental, social and regulatory issues.
The JDA partners are currently setting up a technical working group (“TWG”) to commence pre-feasibility studies. A project company will be incorporated to ensure that total focus on the Project is maintained and emphasis will be placed on local ownership of businesses along the entire value chain.
Rationale for the Project
The Southern African energy market has been constrained by shortages for many years. Natural gas accounts for a very small portion of the energy demand in South Africa (3% versus 21% globally). The South African Government has stated its objective to reduce CO2 emission levels and to increase the use of natural gas (PwC 2012, The Gas Equation Report). The demand for natural gas is also expected to grow in Botswana, Malawi, Mozambique, Zambia, Zimbabwe and Africa in general. The main driver of this demand for gas is expected to be from gas-fired power stations, vehicle and related downstream industries and domestic consumption (International Energy Agency, World Energy Outlook report 2011).
The gas market in South Africa, which is the industrial powerhouse of Africa, is driven by demand from the Saldanha Industrial Development Zone, the Mossel Bay gas-to-liquid plant, the Mossel Bay and Atlantis diesel-fired power stations, an array of ageing coal-fired power stations, which could be converted to gas, as well as possible new power stations in Coega and Richards Bay.
If constructed, it is proposed that the 2,600km main pipeline from northern Mozambique to South Africa will, en route, deliver gas to key towns and settlements in all provinces of Mozambique, thereby stimulating industrial growth in the country. The indicative gas requirements of, as well as benefits to, Mozambique and South Africa appear to justify such a pipeline.
The estimated $US6 (six) billion Project is proposed to be designed to make energy affordable to a greater proportion of the population, promote clean energy, reduce oil import bills, lower carbon footprint and carbon tax, all of which are challenges experienced by the economies of southern Africa. It is the JDA Partners expectation that the Project will be transformational to Africa’s energy infrastructure landscape, as well as supportive of economic growth across the region. The Project will also seek to increase the international competitiveness of southern African economies, create many jobs and improve living standards for the people of the region.
SacOil’s CEO Dr Thabo Kgogo said, “The Mozambique gas project is key for the economic transformation of Southern Africa. Our participation is in line with SacOil’s long term strategy of being a leading Pan African oil and gas company.”