As South Africa enters stage six load shedding, integrated energy and chemical company, Sasol, has announced that South African gas development company, iGas, and Mozambique’s Companhia Mocambiçana de Gasoduto (CMG) have exercised their pre-emptive rights to acquire a combined 30 percent equity interest in the Republic of Mozambique Pipeline Company (ROMPCO) pipeline. The acquisition marks a new era of regional cooperation on the back of intra-African gas trade, with Sasol selling its interest in May 2021, in accordance with the company’s divestment strategy.
The shares, which were sold for an initial R4.1 billion with an additional R1 billion deferred payment if certain milestones are met by June 30, 2024, increase iGas and CMG’s total equity shares to 40% each, up from 25%, with Sasol subsidiary, SSA holding the remaining 20%. Sasol will continue to operate the pipeline, ensuring uninterrupted supply to South Africa.
The 865km pipeline, which connects gas-rich Mozambique to Sasol’s Secunda operations in South Africa, has been critical in supplying energy to the South African economy, and the acquisition is expected to herald a new era of trade between the southern African nations.
The purchase comes at a critical juncture for both South Africa and Mozambique.
South Africa implemented stage six load shedding this week, citing coal plant outages and maintenance delays, plunging the country into six hours of darkness per day as the country’s energy crisis worsens. Natural gas is expected to play an increasingly important role in the country as it diversifies its energy mix, with the pipeline itself serving as a key asset in improving energy security.
South Africa has made natural gas a priority for 2022 and beyond, recognising the role that this clean energy resource will play in boosting industrialization and meeting domestic and regional demand. Gas supply will not only be maintained, but possibly increased, as Mozambique expands its capacity and South African demand rises.
Meanwhile, as large-scale gas projects, such as the Coral-Sul floating liquefied natural gas (LNG) facility, begin to come online, a new era of gas market growth is on the horizon for Mozambique. Mozambique continues to make significant progress toward becoming a competitive gas exporter, with over 100 trillion cubic feet (tcf) of gas.
ROMPCO, which has been exporting gas from Mozambique’s Pande and Temane fields since 2004, has not only paved the way for cross-border gas trade, but has also highlighted the importance of intra-African trade in bolstering energy security across the continent. Going forward, as other large projects, such as the TotalEnergies-led 12.8 million tonnes per annum Mozambique LNG project, are completed, the country will experience unprecedented socioeconomic growth fueled by gas revenue.
The African Energy Chamber (AEC), a strong advocate for increasing intra-African gas trade, commends both Mozambique and South Africa for the acquisition, recognising the significance this historic deal will have for generating revenue in Mozambique through gas exports while ensuring a consistent supply to South Africa as the country’s energy crisis approaches.
“Africa needs gas, and the Chamber will continue to drive this narrative. In 2022, the energy crisis has only become clearer. Countries including South Africa are at risk of delayed socioeconomic growth due to inconsistent power supply, supply which can be improved through gas.
“With projects in Mozambique coming online and new supply brought on the market, increasing intra-African gas trade will be key for unlocking a new era of industrialization, energy access and socioeconomic growth. During the continent’s premier energy event, African Energy Week (AEW) 2022, we will discuss gas, intra-African gas trade and diversification, providing the best platform for deals such as the ROMPCO acquisition to be signed,” states NJ Ayuk, Executive Chairman of the AEC.
During AEW 2022, which will be held in Cape Town from October 18 to 21, 2022, discussions will focus on the role that improved intra-African gas trade will play in Africa. With over 620 trillion cubic feet of reserves across the continent, gas is an ideal solution for eradicating energy poverty by 2030.
About African Energy Week:
The AEC’s annual conference, exhibition, and networking event is AEW 2022. AEW 2022 brings together African energy stakeholders, investors, and international partners to drive industry growth and development and promote Africa as an energy investment destination. The African Petroleum Producers Organization, as well as African heavyweights such as Equatorial Guinea and Nigeria, have partnered with AEW, bolstering the event’s role in Africa’s energy future.