Percentage of new Moz gas possibly destined for South Africa

28th August 2015

By: Donna Slater

Features Deputy Editor and Chief Photographer

  

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A study on offshore gas reserves in the Rovuma basin, near Mozambique, undertaken by consulting firm Frost & Sullivan and published in May 2015, indicates that the reserves might be substantial enough to export a portion to South Africa, providing the country with much sought-after natural gas supplies, says Frost & Sullivan energy consultant Kumbirai Gundani.

The Rovuma basin holds about 125-trillion cubic feet of natural gas, found in Block 1 and Block 4 of the basin.

Gundani notes that some of the gas from the Rovuma basin will be used in Mozambique to spur industrialisation in the country, while the remainder of the gas will be sold on the international gas market through Mozambique, as the basin is in Mozambique’s territorial waters. This will vastly accelerate Mozambique’s gas economy, if the country chooses to develop the gas find.

Gundani tells Engineering News that Mozambique’s Gas Master Plan, published in 2013, states that about 25% of the discovered gas will be used for domestic supply. “Our expectation is that, of the 25% of the gas used domestically, some will be regional gas, and South Africa will be a strong beneficiary of a percentage of that 25%.”

Currently, about 74% of Mozambique’s gas is being used by the power sector, 10% of which is being used by aluminium company Mozal and 12% by cement clinker factories. Therefore, in terms of domestic gas use in Mozambique, Frost & Sullivan expects that most of the gas will end up being used in the power generation sector.

Frost & Sullivan’s study involved interacting with multiple stakeholders covering the gas landscape in sub-Saharan Africa. The stakeholders ranged from project developers; engineering, procurement and construction companies; public utilities; regulators; project funders; international oil and gas companies; and potential gas offtakers.

The gas study was conducted during October 2014 to August 2015 and was commissioned as a result of growing interest from the energy industry around the developments in gas as a feedstock for power generation. “This interest was driven by shale gas and the momentum Mozambique was making in terms of gas finds,” explains Gundani.

The results of the study indicate a sub-Saharan Africa gas infrastructure opportunity worth $174-billion to be made available over the next 20 years.

He notes that existing gas pipelines from Mozambique to South Africa are not sufficient to transport increased volumes of gas into South Africa, and that entirely new pipelines would need to be constructed to facilitate the import of gas from the Rovuma basin into South Africa.

Petrochemicals company Sasol currently takes gas from Mozambique’s Temane gasfields, in Inhambane, through an 865 km pipeline to a synthetic-fuels processing facility in Secunda, in eastern Mpumalanga.

Block 1 and Block 4 of the Rovuma basin are located about 2 000 km from where the Sasol pipeline begins. Therefore, if South Africa were to benefit from gas in the Rovuma basin, a new gas pipeline extension in excess of 2 800 km, from the basin to the shore of Mozambique and all the way to South Africa, would need to be constructed.

Alternatively, gas can be transported in the form of liquefied natural gas (LNG), which would require South Africa to construct new infrastructure in South African ports. Gundani says that transmission pipeline infrastructure location will be determined by gas entry points, with LNG terminals likely to be in Richards Bay, Saldanha Bay or the Coega industrial development zone, all of which have advantages and disadvantages as LNG import facilities.

“As a first step, floating LNG regasification units might be constructed as they would be quicker to bring on line than onshore terminals,” he says, adding that, for example, the gas would be distributed from Richards Bay to Gauteng, and from Saldanha to Cape Town.

On a Larger Scale
The regional ranking of countries with gas infrastructure opportunities, from biggest to smallest, includes Nigeria, Mozambique, Tanzania, Ghana, Côte d’Ivoire and South Africa, says Gundani.

He notes that the most common gas infrastructure to be constructed over the reports’ forecast period of 20 years includes gas transmission and distribution pipelines, floating and permanent regasification units, central processing facilities, LNG terminals and gas-fired power plants.

Currently, there are three LNG terminals in sub-Saharan Africa. With the exception of Côte d’Ivoire, all the countries profiled require an LNG anchor project for gas development.

“Urbanisation is driving the need for increased power,” says Gundani, adding that cities including Lagos, in Nigeria, Johannesburg, in South Africa, Dar es-Salaam, in Tanzania, and Nairobi, in Kenya, are areas where domestic gas demand is expected to increase significantly over the forecast period.

He adds that, with increasingly stringent environmental restrictions prompting a preference for gas as the primary energy source, there will be an increase in demand for gas across all developed and emerging countries.

Meanwhile, Frost & Sullivan has also noticed a trend among African countries, which are taking Mozambique’s lead in formulating Gas Master Plans.

“Since 2005, three out of the nine countries profiled have produced a Gas Master Plan,” he says, adding that these countries include Mozambique, Tanzania and Ghana. A Gas Master Plan is a comprehensive and clear plan aimed to assist the attraction of foreign direct investment (FDI) into a country’s gas sector, and the direction of FDI into particular projects.

However, Gundani notes that political stability to grow a country’s gas economy is pivotal. “Without a stable political environment, the realisation of future gas infrastructure is limited and so many countries will be left with nonmonetised gas resources.”

He states that, with the current low oil prices, African countries have shifted their focus to projects with a clear value creation. “Legislation and gas use plans are important to project attractiveness. With the exception of mature oil and gas markets like Nigeria, Gabon and Cameroon, and for the gas reserves in a country to be attractive and commercially realisable timeously, the country needs to have a clear gas master plan and policy in place.

“South Africa needs policy certainty for the gas sector to develop,” concludes Gundani.

Edited by Samantha Herbst
Creamer Media Deputy Editor

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