South Africa, Mozambique Governments Sign Agreement to Evaluate Viability of a Gas pipeline

South Africa’s Public Investment Corporation SOC Limited (SacOil) and the Instituto de Gestão das Participações do Estado (“IGEPE”) in Mozambique (have signed a Joint Development Agreement to evaluate the technical and commercial feasibility of a transnational terrestrial gas pipeline and distribution facility that will carry natural gas from Mozambique’s Rovuma fields into South Africa, with off-takes to other neighboring Southern African Development Community (SADC) countries.

Under the Joint Development Agreement  (JDA) effective date is 03 December 2014, the JDA Partners will work together to evaluate the viability of the Project with feasibility studies covering engineering, market development, gas purchasing, economic, financial, technical and commercial risk profiles as well as environmental, social and regulatory issues.

Currently the JDA partners setting up a technical working group to commence pre-feasibility studies with a project company to be incorporated to ensure that total focus on the Project is maintained and emphasis will be placed on local ownership of businesses along the entire value chain.

The project comes in the back of continued energy shortages in South Africa and plans by the country’s government to reduce CO2 emission levels and to increase the use of natural gas from the current 3 percent to near the global average of 21 percent.

South Africa also plans to convert an array of ageing coal-fired power stations to gas as well as build new stations in Coega and Richards Bay.

The project also expects  the demand for natural gas is also expected to grow in Botswana, Malawi, Mozambique, Zambia, Zimbabwe and Africa in general especially fuelled by gas-fired power stations, vehicle and related downstream industries and domestic consumption.

Should the project kick off the 2,600km main pipeline from northern Mozambique to South Africa will, en route also deliver gas to key towns and settlements in all provinces of Mozambique, thereby stimulating industrial growth in the country.

“The Mozambique gas project is key for the economic transformation of Southern Africa. Our participation is in line with SacOil’s long term strategy of being a leading Pan African oil and gas company,” says SacOil’s CEO Dr Thabo Kgogo.

The project is estimated to cost $6 billion and has the ultimate objective of making energy affordable to a greater proportion of the population, promoting clean energy, reduce oil import bills, lower carbon footprint and carbon tax, all of which are challenges experienced by the economies of southern Africa.

The Project will also seek to increase the international competitiveness of southern African economies, create many jobs and improve living standards for the people of the region.