Independent oil producer SacOil, the Public Investment Corporation and Mozambique State-owned firm the Instituto de Gestão das Participações do Estado (IGEPE) have signed a joint development agreement (JDA) 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 to South Africa, with possible offtakes to other neighbouring Southern African Development Community countries.

Under the JDA, effective December 3, the partners would collectively initiate feasibility studies covering engineering; market development; gas purchasing; economic, financial, technical and commercial risk profiles; as well as environmental, social and regulatory issues, to evaluate the viability of project.

The estimated $6-billion project would, according to the parties, be designed to make energy affordable for a greater proportion of the population, promote clean energy, reduce oil import bills, lower the region’s carbon footprint and reduce carbon tax.

The partners were currently setting up a technical working group to start prefeasibility studies and a project company would be incorporated to ensure that focus on the project was maintained and that emphasis was placed on local ownership of businesses along the entire value chain.

“The Mozambique gas project is key for the economic transformation of Southern Africa and our participation is in line with SacOil’s long-term strategy of being a leading Pan African oil and gas company,” SacOil CEO Dr Thabo Kgogo said in a statement on Monday.

Elaborating on the rationale behind the project, SacOil outlined that the Southern African energy market had been constrained by shortages for many years and that, despite this, natural gas, at 3% of overall energy consumption, accounted for “a very small” portion of the energy demand in South Africa.

Moreover, the South African government had stated its objective of reducing carbon dioxide emission levels and increasing the use of natural gas.

The demand for natural gas was, meanwhile, also expected to grow in Botswana, Malawi, Mozambique, Zambia and Zimbabwe.

SacOil added that the gas market in South Africa was 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 2 600 km 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. We expect the project to be transformational to Africa’s energy infrastructure landscape, as well as supportive of economic growth across the region,” said the group.

IGEPE is an agency of the government of Mozambique established by law to manage the investment portfolios and shares of the country in commercial ventures.