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Mozambique Ministry of Energy Case Study

Project:
Domestic gas and condensate utilisation study

Client:
Mozambique Ministry of Energy

Country:
Mozambique

The Government of Mozambique’s Ministry of Energy engaged IPA via the World Bank to conduct a natural gas and condensate market study utilising gas supplies from the Temane and Pande offshore gas fields.  The Ministry of Energy planned to optimise natural gas utilisation from its producing gas fields to local communities in Southern Mozambique, primarily as a substitute feedstock or cleaner fuel to replace the more polluting alternatives used at the time, including imported petroleum products and other solid fuels.  National gas demand at the time of the study was low and far below its gas entitlement under the concession arrangements with the field operator, Sasol.  Sasol exported its allowance by pipeline to South Africa, plus purchased Mozambique’s surplus concession gas allowance.

IPA identified potential uses for gas volumes and for each scenario optimised the economic and financial cost-benefits to the country. IPA identified potential gas and condensate markets at the five indicated tapping points of the gas pipeline to South Africa, with particular emphasis on three central tapping points situated at Funhalouro, Chokwe and Magude respectively. Within the chosen markets, IPA used net back pricing analysis based on cash flow modelling to determine whether gas demand from individual sectors was sufficient to justify the expense of additional distribution infrastructure and also reviewed whether the market size could be augmented through incentives to support new industries, through for example, economic analysis to determine the level of subsidies required to make the domestic penetration of gas attractive. The scope of the analysis covered industrial, commercial, power, domestic and transport sectors.

IPA also assisted the government with defining the appropriate legal, regulatory and policy framework to optimise local natural gas and the condensate resource utilisation in Mozambique.

The conclusions of the study provided the Ministry with various gas utilisation industries which could be competitively supplied with pipeline gas and therefore increase Mozambique’s domestic gas consumption. IPA’s analysis also highlighted the regulatory and legal upgrades necessary for the future development of the domestic gas sector.