$6 Billion Pipeline To Provide Natural Gas To This Emerging Market

March 2016, Vol. 243, No. 3

There has been a major deal announced this week in one of the world’s most critical developing natural gas regions: Eastern Africa.

That area has been the site of a number of major natural gas discoveries recently, particularly in the offshore of Mozambique — with spots like Kenya and Tanzania also seeing a growing level of activity.

But the market for this gas has been a major question hanging over development here, with developers largely focusing on complex and expensive plans for LNG shipments out of the region. That could change, however. With a consortium of big backers this week signing a cooperation agreement for an onshore pipeline to send Mozambique natgas south to the major market of South Africa.

The pipeline group includes Mozambique’s national oil firm Empresa Nacional de Hidrocarbonetos, along with private firms SacOil and Profin. Importantly, the consortium is also backed by Chinese pipeline construction firm China Petroleum Pipeline Bureau, showing that China is continuing to cement influence in this key natural resources region.

The deal signed this week calls for the partners to spend $6 billion developing the pipeline. It will stretch 2,600 kilometers from Mozambique’s offshore gas fields into key consuming regions of South Africa — where natgas demand for power generation has been running strong recently.

This project would thus be a major shot in the arm for Mozambique’s natgas future. With the country’s 200 trillion cubic feet of appraised reserves now having a well-paying market close at hand.

Of course, a pipeline of this size isn’t going to get built overnight. But if the project proceeds to financing and then construction we could see increasing investments being made in Mozambique’s natgas sector as developers bet on solid sales and revenues coming here.

The pipeline could also offer opportunities for gas to be sold from other “stranded” producing nations like Botswana — where there is significant potential for coal seam gas and other supplies.

Keep an eye out for more news on the progression of this critical piece of energy infrastructure.

Here’s to piping it in.

By Dave Forest, Oilprice.com

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