Companies urged to gear up for gas revolution in Mozambique

Key players in the gas industry have urged the South African government and companies to gear up for the tremendous opportunities that the gas resources uncovered in Mozambique will offer. 

A final investment decision (FID) has been taken for two projects, while the FID for a third project is expected during the course of this year.

“Once these three projects have taken FID, there will be 31-million tonnes of liquefied natural gas (LNG) under construction,” Paul Eardly-Taylor, who is responsible for Standard Bank’s oil and gas sector coverage activities, told the Africa Gas Forum, in Cape Town, on Monday.

Standard Bank estimates that the three projects will have an overall capital expenditure of $65-billion and projects that $128-billion of FIDs may take place by 2025.

But there’s concern that South African companies are not preparing fast enough to take advantage of these projects.

Lesedi Nuclear Services project development manager Greg Nichollas said South African companies needed to go far beyond simply supplying low-end labour to large contractors responsible for building the projects in Mozambique.

“We need to supply quality skills and develop a manufacturing industry in South Africa that can constantly supply these projects. This is not just about construction. We should be able to supply expertise and long-term opportunities and not just low-cost labour.”

NEPAD Business Foundation project manager Chris Carnegie added that South African companies needed to be competitive.

“We developed Mossgas and Sasol and the largest coal fleet in the world. We have a nuclear power plant. We have the skills and expertise in South Africa to assist in being part of a world-class operation, but we need to do it in a sustainable manner.”

Eardly-Taylor pointed out that there were great opportunities, for instance, in galvanising and processing steel, while opportunities in the logistics and services business were also considered to be enormous.

“With 40 000 workers on site, many of them working 28 days on and 28 days off, there’s a tremendous opportunity for regional tourism.”

Nichollas called on the government to implement its plans.  

“If we brought in LNG, the cost would go down. It’s perfect to integrate LNG with renewables. It balances the grid and complements renewables. It will allow us to grow the renewables market, but the government needs to come to the party. There are vested interests in terms of the coal community and loss of jobs. But by growing the economy, everyone will benefit.”

African Infrastructure Investment Managers asset management principal Chanine Williams said there were many opportunities for infrastructure, particularly around Mozambique’s proposed new gas city, which is expected to house 150 000 people, on the back of gas finds in the country.

“They will need 50 km to 60 km of electrification transmission lines, 300 km to 400 km of road, while the urban area will need to be connected to the rest of Mozambique. The need is enormous, with requirements for water and sanitation, housing and health care. It presents an opportunity for the private sector to come in.”

She anticipated that South African contractors struggling due to the sluggish economy, would be able to transfer their skills to Mozambique.

Eardly-Taylor said the combination of gas and renewables as an energy mix in future was a "no-brainer" with Spain, the UK and South Australia all excellent examples of this.

The Africa Gas Forum, being held at the Cape Town International Convention Centre in Cape Town, has focused on diversifying the energy mix on the continent.

Global management consultancy Kearney partner Igor Hulak commented that South Africa accounted for 27% of the continent’s energy demand. 

According to South Africa’s 2019 Integrated Resource Plan Review, gas is projected to provide 16% of the country's energy mix in ten years' time, compared with 7% today.