JSE-listed SacOil Holdings on Wednesday, March 2nd, announced via SENS that it had entered into a cooperation agreement with a consortium of other companies to investigate building a 2,600km long, wide diameter gas pipeline from northern Mozambique to Gauteng.
The pipeline would be named the African Renaissance and would come at a capital cost of roughly $6bn.
The other parties to the agreement are Empresa Nacional de Hidrocarbonetos E.P (“ENH”), the national oil and gas company of Mozambique, Profin Consulting Sociedade Anónima (“Profin”), a Mozambican private sector consortium, and the China Petroleum Pipeline Bureau (“CPP”), a leading Chinese and international pipeline construction company that will bring a wealth of technical expertise to the pipeline project.
“The project will kick off with what is called concept or pre-feasibility studies,” says SacOil CEO, Dr. Thabo Kgogo. “You look at some of the technical aspects of the project: pipe size, facilities, and get an idea for what you will be charged by suppliers and what you can impose as a tariff. You also look at what approvals are required and the scope of the environmental impact assessments (EIA).”
Dr. Kgogo’s experience at PetroSA, which included experience in upstream gas operations; as well as the company’s expertise in bringing oilfields into development, will allow SacOil to provide input in the technical, commercial and regulatory processes of the project. “We have engineers to look at the route, do the EIA, and we have the capacity to source commercial partners.”
A project of this size requires substantial infrastructure on both ends of the pipeline. Mozambique’s prodigious gas deposits are found in the Rovuma basin, located offshore, and will require a gas processing facility onshore. “On the South African side, you will need a gathering system from which to distribute the gas,” says Kgogo.
There will also have to be a substantial “anchor tenant.” “That anchor customer is going to be a gas power plant in the order of 1-3 Mega Watts at least,” says Kgogo. He points to the gas-to-liquid plant being run by PetroSA. “That has consumed 1.5 trillion cubic feet (tcf) over its 25-year life. The gas reserves in Mozambique are well over 100 tcf. So supply is not going to be a problem.”
The partners aim to complete the prefeasibility study and the feasibility study with a view to making an investment decision in 18 months. The feasibility study will aim to remove uncertainty: “You firm up your market and draft agreements for the offtake of the gas with the buyers and sellers, and you perform detailed design. The EIA would need to be approved by the respective governments, and the funding would need to be in place,” says Kgogo.
SacOil has recently completed Phase 2 of the development programme for its 100% owned Lagia oil field in Sinai, onshore Egypt, which has allowed it to achieve a production target of 1,000 barrels of oil per day. This provides the company with cash flows that can be used to further the work on the African Renaissance.