Sasol dismisses claims of failure of Mozambique Pande and Temane gas project

SASOL_Gas_Pipeline_-_Temane_Mozambique

(2015-07-24) Chemical giant Sasol yesterday dismissed a claim that the Pande and Temane natural gas project in southern Mozambique that it operates would fail to live up to a promise of delivering about US$3 billion (R37bn) revenue over its lifespan to the Mozambican government.

The Pande and Temane gas fields in the Inhambane province are the only sources of natural gas in Mozambique with an estimated 3-trillion cubic feet of gas remaining.

The project was approved in September 2001 and gas flowed for the first time in 2004 through the 860km pipeline from Mozambique to South Africa.

The Centre for Public Integrity, a Mozambique-based NGO, focused on good governance and transparency, blamed the company of robbing the country of revenue.

Speaking in Johannesburg yesterday, Adriano Nuvunga, the author of The Verdict on Ten Years of Mozambique Gas: Sasol Wins while Mozambique and South African Consumers Lose, said the government of that country had lost out when negotiating the project.

John Sichinga, the senior vice-president of Sasol’s exploration and production international, dismissed the claims, saying the organisation had selectively used figures to tarnish the company.

Sichinga said that over the past ten years more than $600 million had been delivered to the government of Mozambique.

“Last year Mozambique received $136m in revenue from the project, over the next ten years, we expect the number to increase to $3bn,” he said.

The gas fields were discovered in the early 1960s by US Gulf, now known as Chevron, which was exploring for oil.

The fields are 70 percent owned by Sasol Petroleum Temane, a Mozambican subsidiary of Sasol, and 25 percent by state-owned oil company, The Centre for Public Integrity, a Mozambique-based NGO

Nuvunga blamed the firm for removing production sharing from the agreement, and agreeing to an abusive pricing formula, saying the government had given away most of its share from the start.

“The annual sale value of Mozambique gas in South Africa is now more than $800m a year, while total government revenue over the first eight years of the project is less than $50m,” he said.

Undermined

In terms of the pricing, Nuvunga said the company had benefited from low royalty and corporate income tax rates had been undermined by an abusive pricing agreement in 2002, which allowed Sasol to buy gas in Mozambique for a fifth of the price that it sold the gas in South Africa.

“In 2009, for example, Sasol purchased natural gas in Mozambique for $1.44 a kilojule and sold it in South Africa for more than $7 a kilojule,” said Nuvunga.

Sichinga disputed the claim saying there was no global benchmark price for gas. “Sasol cannot arbitrary set the gas price; it is set on what the market can afford,” said Sichinga.

According to Nuvunga, Mozambique’s petroleum sector was based on a production-sharing scheme where the main source of revenue was sourced from increases in the share of petroleum produced.

“Yet after gas was found, the government agreed in 2000 to remove the production-sharing component without securing a compensating increase in royalty and corporate increase in royalty and corporate income tax,” he said.

Sasol’s shares yesterday closed 0.48 percent up at R428.99.

Source: Independent Online

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