business review

Natural gas project report

More than 30 years after the discovery of natural gas in Mozambique, this methane-rich energy resource is about to be commercialised in Southern Africa.

The Mozambique Government, Empresa Nacional de Hidrocarbonetos de Moçambique (ENH, Mozambique’s national oil company) and Sasol have signed agreements as the first step towards developing a Southern African natural gas industry.

By committing its plants and markets to taking natural gas, Sasol has enabled design and fieldwork to commence for a R10 billion investment. Upon fulfilling certain conditions in the year ahead, construction can start on a pipeline to transport gas to South Africa. The first gas is scheduled to reach Secunda before April 2004.

The Government of Mozambique, ENH and Sasol have signed two contracts for the Pande and Temane gas fields and exploration acreage. ENH and Sasol will be partners in developing the Pande and Temane reservoirs. These reservoirs will be dedicated to a gas sales agreement with Sasol Gas for on-selling to customers.

Sasol and the Mozambican and South African governments have agreed to form a pipeline company in which Sasol will have a 50% stake and the governments the option to hold a joint 50% stake. Provision has been made for black economic empowerment groups and Mozambican privatisation companies to participate.

Field development advances  Sasol Petroleum International has drilled five wells in the Temane area, proving this reservoir to be a substantial addition to Mozambique’s gas resources. The Temane reservoir will be developed first because it has significantly higher pressure than Pande. Gas will be gathered from 18 wells in the
Temane field and later from 15 wells in the Pande field. The gas will
then be cleaned and compressed in a central processing facility and delivered to the pipeline’s inlet flange for transmission to customers.

A study has established the feasibility of a new pipeline to transport gas to South Africa. The recommended option consists of a new 865 km, 26-inch, high-pressure steel pipeline without initial use of intermediate compression. The pipeline will be buried 1m below the ground’s surface. Care will be taken to minimise the impact of construction. Sasol has undertaken to rehabilitate the pipeline corridor after construction to minimise environmental disturbance.

The 531 km Mozambican route portion will start at the Temane field’s gathering point near Vilanculos and will cross the border near Ressano Garcia. The 334 km South African portion will continue from Komatipoort to Sasol’s Secunda site where it will link to the Sasol Gas network.

Sasol has developed a 1 500 km pipeline network in South Africa. The network delivers gas to more than 600 customers. With the Sigma Colliery near the Sasolburg chemical complex nearing the end of its economic life, an opportunity arose to grow the baseload required for a viable gas project.

By converting SCI at Sasolburg to gas, coal mine development costs are saved, while new environmental benefits are harnessed. SSF at Secunda will use gas to augment the growth currently sustained by coal.

Sasol and the South African Government are currently finalising an agreement for a regulatory dispensation that will facilitate the introduction of natural gas to South Africa.

Major economic benefits  Mozambique will benefit from the new economic stimuli, including new job opportunities and revenue from royalties and taxes. The transportation of royalty gas taken in kind by the Mozambican Government will be a catalyst for developing other economic areas. Mozambique’s economy is expected to change from a predominantly agricultural economy to a resource-based economy. The country will enjoy substantial foreign currency inflows, as well as significant foreign investment. Building a pipeline will stimulate exploration of the potential gas reserves in Mozambique.

Sasol’s South African customers will be able to use an environment-friendly fuel. As natural gas use increases around the world, new technological innovations make gas usage increasingly more efficient. South African consumers will be able to benefit from new technological advances, thereby stimulating economic growth.

On the downside, some Sasolburg jobs will be lost. Positive steps, however, are being taken to minimise the social impact of these losses. At a macro level, new industry, stimulated by natural gas, will result in the creation of new job opportunities.

Gas is one of the most underutilised energy carriers in Southern Africa. Compared with the international average of 20% of energy usage, South Africa’s gas consumption forms only 2% of the energy grid. While this can be attributed to abundant reserves of cheap coal, long-term technological and environmental trends indicate a shift towards the convenience of a cleaner-burning energy source.