Sasol Natural Gas Project


Overview

  • Reference: P-Z1-BAA-001
  • Approval date: 22/10/2003
  • Start date: 24/06/2004
  • Appraisal Date: 31/08/2003
  • Status: OngoingOnGo
  • Implementing Agency: SPT LTD AND ROMPCO
  • Location: Mozambique/South Africa

Description

This vertically integrated project involves development and production of Temane and Pande gasfields (upstream), which are located in the North Eastern region of Mozambique,construction of central processing facility (processing), construction of 860 km gas pipeline (the pipeline), conversion of Sasol's existing petrochemical plants from coal to natural gas, and gas distribution network (downstream). The pipeline is designed to deliver 122 MGJ per annum without initial compression, of which 120 million gigajoule per annum (MGJ/a) will be sold and transported to RSA under gas sales and transportation agreements and about 2 (MGJ/a to Mozambique. Funding from the lenders is sought only for the CPF and pipeline components. Sasol will finance the downstream components (not part of this project) estimated to cost ZAR 2.128 billion from its own resources. The figure below presents upstream and downstream components.


Objectives

The objective is to provide alternative energy source for South Africa, promote new investment and employment generation in both countries, and convert Sasol's petrochemical plants, which currently use coal feedstock, to natural gas.


Rationale

The project is a landmark transaction that will greatly benefit both Mozambique and South Africa. The project marks a major development in the SADC energy market which will for the first time, by transporting natural gas from Mozambique to South Africa's industries, provide a substitute for coal and allow Mozambique to develop its large gas reserves, which were known to exist for more than four decades but until today could not be exploited. The development of these untapped gas resources will enhance the Government of Mozambique's effort to diversify its national economy by stimulating the industrial and commercial sectors. It will lead to considerable foreign currency inflows as well as significant foreign direct investment in the country in addition to the project investment.

The project will have significant socio-economic impact for both countries and will foster economic cooperation and integration in the region. It is consistent with economic objectives of Mozambique and also falls within the NEPAD initiatives that are poised to attract support from all international development institutions.

The proposal is in line with the Bank's objective to promote private sector development in Mozambique, particularly in the vast and untapped gas resources of the country. It is also in line with the private sector's operational strategy which focuses on undertaking several co-financing operations with South African DFI's in national and cross-border investments.


Benefits

The project will provide strong economic impetus for both countries, and at the same time stimulate industrial growth, especially in Mozambique, and would provide significant economic benefits for the two countries. The capital investment in the development of gas fields, processing plant and construction of the pipeline will directly result in higher economic growth for the country. Indirectly, the availability of natural gas may lead to growth in existing industrial business or new projects, which will further add to wealth creation in the country. Increased economic activities resulting from the gas project will create direct and indirect job opportunities. Most of the local socioeconomic effects of the project will result from the direct impacts of about 400 jobs available during the construction period. Wages earned will strengthen food security for the families of the workers for this period. Induced impacts, caused by local spending of income earned directly or indirectly from the project will improve the low levels of economic activities in the areas affected. Some goods and services required by the construction could be supplied locally notwithstanding the low levels of commercial activity in the affected area. Local entrepreneurs will supply agricultural products and accommodate visitors. More job opportunities can also lead to higher economic growth and to additional purchasing power in the form of contractors, sub-contractors, during the construction of the pipeline and services. In addition, new growth is expected from industrial areas where gas will be available and where more jobs will be created.


Key contacts

M'PENG BAYOI Daniel Constant - OPSD4


Costs

Finance source Amount
ADBZAR 54,601,952
DeltaZAR 2,048
TotalZAR 54,604,000