State tight-lipped about possible interest in Sasol's Mozambican gas project

Chemicals and enegry giant, Sasol is divesting of its 50% stake in a Mozambican gas pipeline
Chemicals and enegry giant, Sasol is divesting of its 50% stake in a Mozambican gas pipeline
  • Mozambique has been a country of interest for the past 10 years after the discovery of liquefied natural gas.
  • Sasol has a 50% stake in Mozambique's Rompco pipeline
  • Government is not commenting on whether it plans to buy Sasol's stake

South Africa is in need of fresh ideas when it comes to its energy mix after 12 years of load shedding and growing pollution but the government’s silence on its interest in Sasol’s strategic gas pipeline in Mozambique could be a missed opportunity.

Chemicals and energy company Sasol has had a tough run with its share price falling more 67% in the past five years, as it battles debt and its US Lake Charles chemicals project, running 45% over budget to $12.9 billion. The company has been forced it to enter into a restructuring process, that has seen it put up some of its assets for sale.

Among those assets is its interest in the Republic of Mozambique Pipeline Investment Company (Rompco) pipeline and the Central Termica de Ressano Garcia gas fired power plant, also in that country.

Mozambique has been a country of interest for the past 10 years after the discovery of liquefied natural gas.

The find has the potential to turn around Mozambique’s economy and could do the same for South Africa’s energy troubles.

In its Integrated Resource Plan, the Department of Mineral Resources and Energy (DMRE) identified gas from the Outeniqua Basin and piped natural gas from Mozambique as part of its strategy for the South African Development Community’s (Sadc’s) economic integration. 

The DMRE also stated that it is developing partnerships with South Africa’s neighbours for joint exploitation and natural gas beneficiation in the region.

However, when asked about its possible interest in the pipeline, the DMRE’s response was short and lacking in detail.

 “Please note that the DMRE is not able to comment on this enquiry,” it said in an emailed response. 

Jacky Mashapu, corporate affairs manager at the Central Energy fund that reports to the DMRE, said the organisation does not comment on listed companies as this could cause share price movement. 

Mashapu added that the CEF would provide an update “ and when there is an announcement”.

Sasol head of group media relations Alex Anderson said the company will provide details on its restructuring process next month but the Sasol’s divestment from Rompco is underway.

Senior associate at Tutwa Consulting Azwimpheleli Langalanga said: “It would be remiss of the government to not be involved in the Mozambican gas [pipeline]. It also talks to maybe foreign policy, economic diplomatic incapacity.

Langalanga added that South Africa’s preoccupation with fracking for gas in the Karoo when the gas was discovered in Mozambique could be what side tracked the country.

But even the choice to frack for gas isn’t the best one since those gas deposits don’t last long and is harmful to the environment.

He said Mozambique’s gas could be beneficial to South Africa as a large economy and the region.

“It would be welcomed if government was to be involved in the gas industry in Mozambique, as a state owned enterprise, it would have been good to be involved in there. It’s very strategic and extremely important from an energy security perspective,” Langalanga said.

But South Africa has been experiencing governance issues and its running of State Owned Enterprises (SOEs) “raises red flags”.

  • READ|Sasol to start cutting jobs in mid-August amid slump in global oil price

To remedy that, he suggested that “a reconfigured” Eskom could have unit focused on gas that has a 51% government interest and a 49% private sector interest.

However Roelof van Tonder, director of market insight and development at research and consulting company, Africa House said South Africa is already involved in gas projects in Mozambique and the government doesn’t need to be involved in the Sasol sale.

He added that gas is a 50% less harmful source of energy compared to coal for South Africa and the country’s interest in Mozambique’s gas makes sense.

A 2018 Greenpeace report showed that Mpumalanga is the world’s worst Nitrogen Dioxide hotspot, the source of which is its coal-fired power stations, making the need for South Africa to have a clean energy mix, a priority.

Chief economist at the Efficient Group, Dawie Roodt said the Mozambique gas pipeline could be of great benefit to South Africa.

He said Eskom in particular, could benefit from a gas as a cheaper source of energy.

However, he is concerned government involvement because of its poor track record in running SOE’s.

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