The discovery of vast quantities of gas offshore of Mozambique’s northern province could catalyse the economic development South Africa needs.
Mozambique’s Rovuma basin holds the biggest natural gas discoveries in recent history with the basin estimated to hold about 32 billion barrels of equivalent (boe), enough to supply Europe’s gas needs for a decade.
Speaking at the Africa Gas Forum in Cape Town on Monday, recently retired executive director of SA Oil and Gas Association (Saoga) Niall Kramer, said South Africa – coupled with last year’s discovery of an estimated 1 billion boe in natural gas 175km off our southern Cape coast – was potentially “the biggest economic catalyst since mining”.
Kramer said the opportunity for infrastructure investment was huge and we needed to grasp the opportunity.
“Or,” he warned, “we can carry on what we are doing since the announcement of Operation Phakisa (a government initiative unveiled in 2014 to fast track the implementation of solutions on critical development issues) and hold talks about talks about talks.”
Aside from using gas for base load electricity supply combined with renewable energy, and for industrial and domestic use, there was also value in the value chain which included agriculture (gas to fertiliser), roads, import terminals, and civil engineering.
He said if the Petroleum Resources Development Bill – which he warned in its current form would likely be contested – goes through to make it attractive for exploration investment, and licences are issued and we are not ready and don’t have the supply in South African business, then we have only ourselves to blame.
“I see importation of liquified natural gas (LNG), and secondly exploration, as big opportunities for South Africa.
Paul Eardley-Taylor, head of Oil and Gas Southern Africa Client Coverage at Standard Bank, said the concessionaires own the gas from Mozambique's Rovuma Basin until 2047 and 2053,so we would have to buy it from BP or other private companies.
However, Mozambique is to get about 71.5m boe per annum by 2028 (twice what is imported through the Rompco pipeline to Sasol), so will be in a position to supply small scale energy to the region.
But beyond Mozambique’s gas, Eardley-Taylor said there is $128bn in foreign direct investment (FID), “probably more” in Mozambique’s LNG infrastructure.
This could save South Africa’s construction industry, which was “in the doldrums”, said Greg Nichollas, project development manager at Lesedi.
Mozambique was engaged in two mega LNG projects which would extract, liquefy and ship gas tapped offshore.
Nichollas said there was “no doubt” South Africa should be “right at the forefront” in terms of implementation and construction in these two projects due for production in 2024.
He said South Africa needs to supply skills and our manufacturing industry needed to be developed to supply these projects for the next 30 years.
He said the value of having high-end skills and manufacturing developed in South Africa created a multiplier effect, but we would be competing in an open market so “can’t expect a free ride”.
“We need to supply the right skills and expertise, which we have (due to Mossgas, our coal industry and nuclear power production) so that we can be part of a world class operation.”
Kramer warned that Andarko and Exxon were international companies with their own work forces so if South African industry was not ready, the companies would bring in their own resources.
Nichollas said beyond the LNG facilities to be built at Mozambique’s Afungi peninsula, the area was “completely remote at the moment” with only one road in and out, and a river bridge which was “out of action at the moment”.
This meant ancillary infrastructure was needed, offering “development opportunities for people who are bold.”
He said his suggestion was to “get up and establish yourself in Mozambique. The quantum of opportunities there are enormous for everybody and will happen almost instantaneously. If we don’t act, thousands of others will act.”
– West Cape News