Published On: Fri, Oct 30th, 2015

MOZAMBIQUE: Vast energy resources steer Mozambique into economic powerhouse

Mozambique-capital-MAPUTO, (CAJ News) – MOZAMBIQUE, reaping the fruits of successful economic reforms and subsequent high growth rate, is on the threshold of becoming a continental energy powerhouse as its multi-billion dollar projects reach incubation stage.

This is a culmination of the government of the Southern African nation prioritizing energy as one of the key drivers of the economy.

Some major energy projects in hydroelectric, coal, solar, oil and gas, valued at US$10 billion (about R136 billion), are underway while other energy projects have been completed.

Mozambique has started the construction of a natural gas–fired power plant worth $1,2 billion (R16.32 billion) plant aimed at boosting the country’s energy supply at subsidised prices.

Of all the energy projects lined up, comprising the major electricity, coal, oil and gas, one of the most prominent ones is the expansion of the Cahorra Bassa Dam in the continent’s fourth longest river, Zambezi.

This presents a massive potential to increase energy production by around 3 600 megawatts.

More than US$7 billion (R95.2 billion) have been invested into the project.

The region, including South Africa, which has been the main source of energy for power-starved Southern Africa, is poised to benefit from the hydro-power project.

Mozambique Energy and Mines Minister, Pedro Conceição Couto, also assured that while such power projects will end the country’s power challenges, his country be able to export more to neighbouring countries, generating the much needed foreign currency in the process.

The neghbouring country’s power utility Eskom of South Africa, which is battling to satisfy internal demand, recently hinted at importing additional power from Mozambique from its current 1 500 MW.

Eskom’s Business Development Manager for the company’s Southern Africa Transmission Group, Willem Theron, confirmed that the state-run utility planned to import a total of 6 250MW of power to two new South Africa
coal-fired plants, Medupi and Kusile.

The bulk of the power importation will be coming from Mozambique’s Cahora Bassa Dam.

“It is assumed that some of the power can be through imports,” Theron told a conference of stakeholders in the coal mining industry in the Mozambican capital, Maputo, recently.

Apart from the expansion of Cahora Basa facility, Mozambique has embarked on the construction of five new hydroelectric dams with the sole purpose to increase the country’s energy production by around 3 600 MW.

Other critical dam projects initiated comprise the Lupata Hydroelectric facility in Tete province, with a potential to generate 416 MW at an estimated cost of $1,072 billion (R14.6 billion) , the 210 MW Boroma Hydroelectric Dam at an estimated cost of $572.5 million (R7.77 billion) and the Mphanda Nkuwa dam.

Apart from creating more than 4 000 jobs for the Mozambican locals, the projects located some 61 kilometres southeast of the Cahora Bassa Dam have potential to generate 1 500MW, which has an estimated cost of $4,2 billion (R57.12billion)

In addition to abundant sources of hydroelectric power and gas reserves, Mozambiqueis is teeming with coalfields at Minas Moatize and Ncondezi.

The country is through such mineral resources set to generate an additional 700 MW for local consumption while the other reserves will be exported to South Africa, Malawi, Zambia and Zimbabwe.

Some of the new coal power plants, which are located close to the power local transmission network, will take off before end of this year while others are projected to start running their commercial operations in 2018.

On the oil and gas front, the resources are equally enormous.

Recently, Engen, a leading African energy multinational successfully launched its Beira Terminal, which is poised to strategically boost the energy supply chain in the entire Southern African Development Community (SADC) region.

Following the launch in September, Engen, which its Head office is in Cape Town, South Africa has significantly increased its supply capacity to a number of countries in the sub-region.

The new 24 000m³ Beira Terminal is now in full operation and supplying petrol, diesel and lubricants to the main hubs in Mozambique, as well as to other countries in Southern Africa where Engen has operations.

Outside SADC, Engen has operations in Burundi, Gabon, Ghana, Rwanda and Réunion.

“We’ve tested railway capabilities from Beira to Bulawayo in Zimbabwe and to Francistown in Botswana, which was very successful.

“In essence this means that we can take some pressure off of our Durban Refinery and supply Botswana and Zimbabwe directly from our new depot,” said Drikus Kotze, General Manager of Engen’s International Business

Kotze said the investment reaffirmed Engen’s strong commitment to the Mozambican market and the African continent.

“Where others have disinvested in search of more profitable upstream opportunities elsewhere, Engen has invested extensively in these regions, supplying infrastructure, harnessing local skills and business partnerships, and giving back to the communities in which we operate,” said Kotze.

Teodomiro Sarmento, Managing Director of Engen Mozambique, said the depot’s strategic value is to ensure it met local growth and future market share targets and to establish another supply corridor into Southern Africa.

“This will ensure security of supply for Engen’s operations there. Having sufficient capacity in the region will reduce our dependency on third parties, lessen our cost of supply through pipeline, and improve efficiencies,” said Sarmento.

Currently, Engen’s operations cover the main hubs in the three geographic regions of the country.

The company also operates service stations from Maputo Province in the south to Tete in the Centre.

Expansion plans would also cover growth areas, in northern Mozambique, particularly in Nacala and Pemba, and the main corridors.

Such growth prospects in Mozambique have not gone noticed internationally.

It has been reported since 2009, Portuguese had been returning to Mozambique, the former colony, because of the growing economy and the coincidental poor economic situation in Portugal.

That underscores the remarkable recovery of a country that suffered a deadly civil war until the early 1990s. The resettlement of civil war refugees and successful economic reform have led to a high growth rate.

Discoveries of natural gas make the prospects even brighter for this country of 25,8 million people.

In 2012, large natural gas reserves were discovered in the country, revenues from which might dramatically change the economy.

Building the gas liquefaction facilities will take five years as from 2016.

Up to $40 billion (R544 billion) is projected to be added to the Mozambican economy over the next 20 years, making Mozambique, anticipated to be an energy powerhouse then, an economic giant overall.

Neighbouring countries are again set to benefit.

During his Mozambican counterpart’s official visit to South Africa last week, President Jacob Zuma said the new energy generation projects would yield socio-economic benefits for South Africa and Mozambique.

“We have directed the relevant ministers to identify and implement joint projects in the gas infrastructure and development.

“The message we want to communicate is simple and clear. We urge our private sector to invest in each other’s territory and help create job opportunities,” he said after a meeting with Mozambican leader, Filipe Nyusi, at the Union Buildings in Pretoria.

CAJ News

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