A Pathway for Mozambique:  From Reserves to Production to Prosperity
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A Pathway for Mozambique: From Reserves to Production to Prosperity. Presentation by Sara Menker , Founder and CEO of Gro Ventures 27 February 2013. Confidential. Mozambique’s Natural Gas: The Facts. Offshore drilling began in 2009 and Anadarko announced a small discovery early 2010

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Confidential

A Pathway for Mozambique: From Reserves to Production to Prosperity

Presentation by Sara Menker, Founder and CEO of Gro Ventures

27 February 2013

Confidential


Confidential

Mozambique’s Natural Gas: The Facts

  • Offshore drilling began in 2009 and Anadarko announced a small discovery early 2010

  • 2010 – 2011, 7 out of 9 wells that were drilled discovered significant amounts of gas

  • 2012: one-third of global oil and gas discovery volumes were in Mozambique

    • 61% of discovered volumes were in Sub-Saharan Africa.


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2012: The Year Mozambique Became a Natural Gas Superpower

The Natural Resource Curse and Challenges for Mozambique

  • Reframing the dialogue around natural resources in sub Saharan Africa: Mozambique is not being challenged with a curse, but is being presented with an opportunity

  • Capturing this opportunity requires Mozambique to implement specific policies and initiatives

Ten Largest Discoveries of 2012

Source: WoodMackenzie


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Mozambique’s Natural Gas: The Facts

Area 1 Estimates

  • Reserves: 50 TCF

  • $28bn= Amount that will be spent over the next 30 years producing a portion area 1 gas that is sufficient for a 2-train LNG Project (11.1 TCF)

  • $18.5bn= Cost of a 2-train LNG Project

  • $17bn= The government’s profit share the 20 year production period

  • $16bn= Income tax revenue


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Mozambique’s Natural Gas: The Facts

Area 4 Estimates

  • Reserves: 42 TCF

  • $28bn = Amount that will be spent over the next 30 years producing a portion area 4 gas that is sufficient for a 2-train LNG Project (11.1 TCF)

  • $18.5bn= Cost of a 2- train LNG Project

  • $18.5bn= The governments profit share during the 20 year production period

  • $16bn= Income tax revenue


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Natural Resources as Opportunities, Not Curses

Data from the World Bank, Graph powered by Google


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Capturing Opportunities

  • The only way for Mozambique to succeed in capturing natural resource opportunities is if the Mozambican government initiates sound policy reforms while strengthening its institutions


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Institutional and Regulatory Reform

  • Regulatory framework must be consistent and finalized

  • Fiscal policy stabilized

  • Policy stabilization and regulation will lower risk premiums

  • Contracts must be legally enforceable and financially sound


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Commercialization

  • Further commercializing ENH, INP and their subsidiaries

  • ENH has 10% ownership in Area 1 and 15% ownership in Area 4

    • Carried through exploration phase

    • Further commercialization essential to access the funding required to participate in development


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Service Providers to the Coal and Gas Industries

  • Cost competitiveness is essential to LNG. East Africa’s infrastructure is consistently lacking and the local service sector is non-existent

  • Important to increase the number of national and international service providers

    • Nigeria: > 400 oilfield service companies. It is the only sub Saharan country with a substantial home-grown industry


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Emphasis on Local Content

  • Inclusion of provisions requiring operators to be socially responsible, use local content and employ Mozambicans

  • The kkey is to act immediately with regards to education. The opportunity costs of waiting are high

  • Short-term costs: longer project lead times, higher costs and lower project values

  • Long-term benefits: strengthened infrastructure and heightened competitiveness


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Emphasis on Local Content

Qualitative Summary of Local Content Approaches in sub Saharan Africa

Source: Wood Mackenzie


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Downstream Opportunities

  • Maximizing resource value:

    • Multi-use infrastructure important: especially railroads, which should be operated independently and not by resource extractors

    • Gas monetization options: Liquefied Natural Gas (LNG), Gas to Liquids, Pipelines, Power Plants, Fertilizer Plants, Chemicals, etc.


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Diversify Funders

  • Large infrastructural projects need to be funded by diverse actors, beyond traditional developmental financial institutions (DFIs)

  • DFIs alone cannot meet the funding requirements of ENH, let alone all infrastructure projects.


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Revenue Management

  • Ensuring new revenue is managed efficiently and transparently, and invested in a responsible way with a focus on:

    • Education

    • Agriculture

    • Infrastructure

    • Banking and financial services

    • Telecommunications

    • Creation of a sovereign wealth fund


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Mozambique’s Natural Gas: The Facts

Area 1 and Area 4

  • The calculated costs and revenues were assuming only two 2-train projects. Area 1 alone has sufficient gas for 4 as does Area 4

  • The reserve figures are still growing for both fields

Area 1 Estimates

  • Reserves: 50 TCF

  • $28bn= Amount that will be spent over the next 30 years producing a portion area 1 gas that is sufficient for a 2-train LNG Project (11.1 TCF)

  • $18.5bn= The cost of a 2-train LNG Project

  • $17bn= The government’s profit share the 20 year production period

  • $16bn= Income tax revenue

Area 4 Estimates

  • Reserves: 42 TCF

  • $28bn = Amount that will be spent over the next 30 years producing a portion area 4 gas that is sufficient for a 2-train LNG Project (11.1 TCF)

  • $18.5bn= The cost of a 2- train LNG Project

  • $18.5bn= The government’s profit share during the 20 year production period

  • $16bn= Income tax revenue


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Summary

  • Natural gas in Mozambique becomes an opportunity, not a curse, through:

    • Institutional and Regulatory Reform

    • Commercialization

    • Emphasizing Local Content

    • Increasing number and capabilities of service providers

    • Capturing Downstream Opportunities

    • Diversified funders

    • Effective Revenue Management


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