Eskom and EDM in talks to use Gigajoule’s Rovuma pipeline

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South African electricity utility Eskom is in talks with its Mozambican counterpart EDM to jointly develop 2500 MW of gas-fired power in Mozambique along the route of the proposed Gasnosu pipeline, which will run from the northern Rovuma Basin gas fields to Maputo and on to South Africa.

The Gasnousu project, which was proposed three years ago by South African company Gigajoule in partnership with Mozambique state oil company ENH, will need to beat off competition from SacOil’s African Renaissance Pipeline project for the giant pipeline concession contract.

Last week, SacOil announced it has teamed up with Chinese state-owned pipeline firm CPP and a secretive Mozambican company called Profin to develop a rival pipeline project to take Rovuma gas to South Africa. According to a report published on Friday, 4 March in Natural Gas Daily, Eskom continues to “engage with the proposed [Gasnosu] developers regarding the project development cost, budget and timelines”, an Eskom spokesperson said, adding that “feasibility studies will commence shortly”

“We are engaging with EDM regarding the joint development of the capacity required in Mozambique,” the Eskom spokesperson added.

Should the Gasnosu project go ahead Eskom will also look to develop 2500 MW of gas-fired power in South Africa to help ease the country’s chronic electricity shortage.

According to South Africa’s energy minister, Tina Joemat-Pettersson, gas will be the “cornerstone” for that country’s baseload power supply. The department of energy is preparing to launch 3.2 GW of gas-fired independent power plant tender later this year. It is anticipated most of the gas will be sourced from LNG, but regional gas supplies will also be considered.

Eskom expects the Gasnosu feasibility studies to take around six months, after which it will make a decision whether to proceed with the project. However there are doubts where the cash-strapped South African utility will have the finances to support the offtake of a project of this size, NGD reported.

While the ARP project has not announced an offtaker, it does have sound financial backing. CPP, a subsidiary of Chinese state oil company, CNPC, will fund and conduct feasibility studies on the 2, 600 km pipeline. Should the project go ahead it will construct the pipeline and source the debt financing for 70% of the estimated $6 billion project from financial Chinese financial institutions.

ARP also appears to have a strong political foothold in Mozambique. Profin signed a memorandum of understanding with ENH in October 2015 to partner in gas projects in Mozambique. While the company was established as a, ‘Sociedade Anonima’, meaning the identities of its shareholders do not have to be made public, Mozambican media have reported that an executive director is Olivia Machel, daughter of Samora Machel, the country’s first president.

However Gigajoule also has close links to Frelimo political elite. The chief executive of Gigajoule’s Mozambican subsidiary, Matola Gas Company, Bruno Morgado, is close to the family of former president Joaquim Chissano, Mediafax reported.

Pressure will be on state petroleum regulator INP to ensure that  when the final project is selected it will be on its technical and economic merits, rather than how well connected its backers are.

“According to the new Petroleum law of 21/2014 a tender has to be launched for the concession of a gas pipeline,” a spokesperson for Mozambique state regulator INP told NGD.

However, with the low oil price delaying a final investment decision on the Rovuma Basin gas projects, final proposals and a tender for the gas pipeline is likely years away.

source: zita news

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