Mathikizana Amaral Carlos Matos, a Maintenance Engineer in the field of Control and Protection systems at the Hidroeléctrica de Cahora Bassa in Mozambique, gives insight into Mozambique’s gas sector trends and what that means for South Africa.
In Mozambique, the structuring of the gas sector with the development of the Gas Master Plan (GMP), not only defined the institutional, political and legal framework with its respective scope, but also allowed foreseen developments such as the 175MW gas-fired power plant (CTRG) in Ressano Garcia built in 2014, and the 100MW Gigawatt gas-fired power plant, which is currently under construction. In addition, the GMP facilitated the revision of policies such as the petroleum act, to effectively come in line with the Government of Mozambiques’s (GoMs) strategy.
The GoM sees the availability of natural gas in the domestic market as a vital catalyst for the country’s industrialisation and economic transformation. The 2014 Petroleum Law states that the Government shall guarantee that a quota of at least 25% of the oil and gas produced in national territory is dedicated to the national market, therefore guaranteeing that the local Small and Medium Companies play a much larger role in the gas sector.
New tax law
One key aspect which forms part of the three pillars of the GMP is the implementation of transparent and equitable taxation rates in the form of royalties. The new Petroleum Tax Law Nr 21/2014 and the Decree Law-Rovuma Basin Nr 2/2014 have adjusted the limits of the tax stabilisation for a 30-year period to a 4% tax increase after the 10th year and a 6% tax increase after the 20th year. The law specifically applies to the Anadarko and ENI EPCC in the Rovuma Basin.
Fiscal stability is an important guarantee for financial institutions that will provide billions of dollars in loans to develop the liquefied natural gas (LNG) Rovuma project. According to “Africa Influence Exchange” there will be a Rovuma Basin Market Briefing on 28 January 2016 in Maputo hosted by AIE intended to bring together the various stakeholder from National and Provincial Governments, Oil & Gas Operators, Project Develop, etc. to provide clarity on the Legal Framework, Finance and Project Opportunities, and overall infrastructure plans and constraints.
South Africa’s gas opportunities
The unprecedented discovery of off- and on-shore natural gas in Mozambique of over 277 trillion cubic feet offers an opportunity to develop not only the country’s but also the neighbouring countries gas markets.
From South Africa’s perspective, they have already been successfully exploring, processing and transmitting natural gas since 2004 via an 865km pipeline, from Temane (Inhambane Province – Mozambique) to Secunda (Mpumalanga – South Africa) that is used to generate power and other natural gas derivatives; this is evidently a wide opportunity to expand operational and production capacity.
In 2012 Sasol increased its production capacity from 120 million gigajoules per annum (MGJ/a) to 183 million GJ/a, which resulted in the materialisation of the 175MW gas-fired power plant (CTRG) in Mozambique. This plant is used to meet 23% of the country’s current demand against a 14% annual growth rate.
With the priorities set out in Mozambique’s GMP – LNG, power generation, fertiliser, methanol and Gas to Liquid (GTL), alongside its policy to promote international investment—has opened a wide window of opportunity for South Africa’s private/public companies with the same integrated value of proposition and proven expertise.
On the other hand in the short to medium term, gas in Mozambique might prove to be the least-cost technical alternative to meet South Africa’s present supply and demand gap with added benefit of polluting less, hence creating less ecological degradation than other fossil fuels such as coal and oil.
Impact of failed projects on economic development
Electricity consumption (kWh) growth in urban, peri-urban/rural residences, industries and other commercial enterprises are key contributors for Mozambique’s socio-economic growth. Statistical figures show a direct relationship between the country’s gross domestic profit (GDP) and electricity consumption.
The development of robust electrical power infrastructure will provide quality in electricity delivery as well as an increase in capacity to meet the demand of existing/new domestic consumers and also of large customers.
Socio-economic development will be boosted as the quality of energy improves in industrial and commercial development areas in the country allowing for investment expansion. Therefore, it’s safe to say that failure to implement planned power projects will result in development retardation.
Failure in implementing planned power projects is directly linked to the weak financial capacity of the GoM and the national utility. Based on the USAID SPEED report-The electricity Sector in Mozambique-An analysis of the Power Crisis and its Impact on the Business Environment, it was recommended that two major actions that form part of the power sector reform, which should be taken by the government of Mozambique namely – the unbundling of the vertically integrated state-owned utility and creation of a power sector´s independent regulatory body.
This is believed to improve the business environment, thus attracting the private sector into playing a larger role in the economy, seeing that the private sector is known to guarantee financial mobilisation and quality management.
Matos is a Mozambican with a Degree in B-Tech. in Electrical Engineering from the Cape Peninsula University of Technology. Currently, Matos works at the Hidroeléctrica de Cahora Bassa in Mozambique as a Maintenance Engineer in the field of Control and Protection systems. He is currently engaged with his Master’s Degree Studies at the University of South Africa (UNISA), where he is developing a topic of utmost concern to the Southern Africa Region namely “Network Controller Operation for Integrated AC/DC Transmission Systems at Cataxa Substation”, which is a component study of the “Mozambique Regional Transmission Development Project – Integrated Transmission Backbone System –STE”.