Sasol expands in southern Mozambique

Jun 03, 2016 12:00 AM

Bouncing along a dirt road in a minibus in rural Mozambique, the landscape is monotonous – lush vegetation on both sides of the road, with the odd dwelling, and occasional cow or goat. Not much else.

Then ahead of us, a structure loomed over the horizon: Sasol’s new drill rig, which has just started development activity in the Temane field. This is the first of 13 well-sites chosen for the rig, which was supplied by French contractor Societe de Maintenance Petroliere (SMP) which will be drilling until 2017. The landscape may be uninspiring, but below the surface are vast reserves of oil and gas.

Twelve of the production wells will be for gas and oil, evenly divided between the two, while the 13th is intended for the return of water. As many as 40 wells could eventually be drilled as the project moves into later phases. Sasol says that drilling now underway is partly an appraisal programme, and therefore it is too soon to forecast what eventual plateau production will be.

The drilling programme represents the launch of the production-sharing agreement (PSA) licence which Sasol acquired this January, and the drilling will take place at both Temane and Inhassoro. Sasol says it has a 100% interest, although Mozambican state ENH is entitled – under the terms of the PSA – to a calculated share in any production. The cost of first phase of this expansion, including drilling, is $1.4bn.

Sasol's drill rig at Temane, Mozambique, (c) John Fraser
Sasol's drill rig at Temane, Mozambique,  (c) John Fraser

Gas from the wells will be sent along a pipeline network to Sasol’s existing Central Processing Facility (CPF) in Temane.  This complex already cleans and pressurises gas from the Temane and Pande fields before sending it along the ‘Rompco’ 865km pipeline into South Africa. Sasol holds a 50% interest in Rompco, which stands for Republic of Mozambique Pipeline Company.

Sasol has been producing gas from Temane and Pande since 2004. The two fields combined produced 4.4 bn m3 last year -- up from 4.25 bn m3 in 2014 and 3.8 bn m3 in 2013 -- of which Sasol’s share is 70%. But the new drilling is expected to increase near-term production, rather than simply replace any decline from existing fields.

The drilling of the new wells is linked to an expansion at the CPF: a fifth gas processing train will be installed at the CPF to process the additional gas, and there will also be new trains to produce oil, condensates and LPG.

The drill rig and its support infrastructure is due to be dismantled and taken to the other new sites as the expansion project is rolled out.

“The spud of the first well in the PSA licence area reaffirms Mozambique as the heartland of Sasol’s oil and gas strategy in sub-Saharan Africa,” said John Sichinga, Senior Vice President, Sasol Exploration and Production International.

He explained that the existing Sasol operations in Mozambique had primarily been undertaken to provide gas for South Africa, while the new era of activity could boost supplies to Mozambique, supporting the country’s industrialisation aspirations.

Sasol is in discussion with the government of Mozambique over the possible construction of a 400-MW gas-fired electricity plant alongside the CPF at Temane.

“We are helping with industrialisation of Mozambican economy,” said Sichinga.  He said the power plant would be built in tandem with an electricity transmission line. “If the power plant does not go ahead, we can use gas elsewhere,” he said.

Sichinga was confident that if the plant is developed, it could supply electricity to Mozambique, and could also inject any surplus power into the Southern African regional grid. Gas from the PSA which is not used by the power plant would expand deliveries along the pipeline to South Africa, a country which has been experiencing severe electricity constraints. Meanwhile, in line with international climate change agreements, South Africa is committed to reducing its carbon footprint by cutting reliance on coal, with gas seen as a greener alternative.

Sasol interests in southern Mozambique (Map credit: Sasol)

Sasol interests in southern Mozambique (Map credit: Sasol)

“There is some constraint on production due to the international market, and the influence of international oil prices.   However, exploration is continuing onshore and offshore,” Sichinga added: “This expansion of our activities in Mozambique is a core part of our strategy."

“Even though Mozambique is going through a difficult phase, we in South Africa and Mozambique are joined at the hip. We are here for the long term.”

Further oil and gas development by Sasol is likely to assist Mozambique to boost growth, employment and export revenue. The country has been in financial difficulty, with recent reports suggesting that it is finding it difficult to service its debt.

The Rompco gas pipeline’s capacity has been incrementally expanded since it started operating in 2004. A recent expansion was the Loop Line 1 (LL1) in 2015, and now LL2 is under construction. Sasol says that further expansions in future are possible, as and when reserves and the market justify it.

Sasol declines to be drawn on the prospects for third-party gas pipelines including a mooted $6bn Chinese-backed concept. Also unwilling to be drawn is Eni, likely lead developer into the 2020s of massive offshore gas reserves much further to the north of Mozambique.

LL1 opened up additional gas supply capacity to customers in Ressano Garcia, which includes the 175-MW gas-fired power plant jointly developed by Sasol and Mozambican state utility EDM.

Sasol has been buffeted by the low oil price, and has delayed some of its global expansion plans. The company has identified Southern Africa and North America as its two focus regions, although early in 2015 it shelved plans for a $14bn, 96,000 b/d gas-to-liquids unit in the US state Louisiana.

Sasol’s new drill rig will be moving from the location of the first well to 12 further sites in turn, changing the monotonous view along other dirt roads, helping to expand production of oil and gas, and further supporting the economic development of the economies of both South Africa and Mozambique.

 

John Fraser

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