The Business Year

Estíªvío Pale

MOZAMBIQUE - Energy & Mining

Double Time

CEO, Companhia Moçambicana de Hidrocarbonetos (CMH)

Bio

Estévío Pale has more than 30 years of experience in the mining industry. He is currently the CEO of Companhia Moçambicana de Hidrocarbonetos (CMH). Between 1996 and 2005, he was the National Director of Mines at the Republic of Mozambique’s Ministry of Mineral Resources and Energy, where he was responsible for the supervision and control of mineral activities as well as the formulation and implementation of the mining and geological policies. He has also been director of numerous companies in the mining sector including Promaco (SARL) and the Mining Development Company, as well as the General Director and Chief Executive of Minas Gerais de Moçambique. He has a postgraduate diploma in Mining Engineering from the Camborne School of Mines, and a Master’s degree in Financial Economics from the University of London (SOAS).

To what extent has the experience in operations at the Pande and Temane fields paved the future for onshore gas exploration in Mozambique? Our experience has shown that the conditions […]

To what extent has the experience in operations at the Pande and Temane fields paved the future for onshore gas exploration in Mozambique?

Our experience has shown that the conditions are in place for other projects to be developed in this field. Since 2000, we have explored and developed the production of a fairly robust project with no major problems. Our success signals to any investor that Mozambique has the conditions to develop a project of this magnitude or even larger. We are now expanding into another chapter of our success story.

To what extent is the expansion underway?

Our project is under an incorporated joint venture, where CMH owns 25% of the project, Sasol Petrol Temane (a subsidiary of the Sasol Group) holds 70%, and IFC has the remaining 5%. This partnership is being improved every day. We hold meetings to discuss any issues that have arisen during the project and how to overcome them. The initial production capacity in 2004 was 120 million gigajoules per annum, and in the last two years we have been expanding to increase the production capacity to 183 million gigajoules. The expansion was finished in June 2012, and we have significantly improved capacity to the point where we can now supply gas for additional projects. The project has been very successful in that sense. Success stories always come with challenges to face and milestones to achieve, and so far, so good.

What impact will your expansion have in the medium term?

Our financial year goes from July to June. The results show an increase in terms of profits to the shareholders, though those profits are not being translated into increases in dividends. This is a problem that we are facing, but it is due to the conditions of the financing we have from lenders. They have high levels of financial ratios to trigger the payment of dividends. In terms of operations, the trend is going upward for the next five years. Currently, we are negotiating new contracts to supply natural gas for power generation and other projects to increase gas consumption in the domestic market because most of our gas goes to South Africa. The demand is increasing and more projects requiring gas are appearing. Increased activity requires more gas, more exploration, and drilling more wells. To do that requires further funding, to increase proven reserves. The operator is always thinking ahead to increase capacity, but we have to work in stages.

What role do international commercial banks or investors play?

We are in negotiations with a number of international commercial banks, and we have reached a point where we can approach them. The company could not do this in the past because of our financial situation; we did not have a track record. Now our lenders believe in our management, and we have a good track record to approach commercial banks, too. When it comes to private investors, it is a bit complex. Our mandate does not allow us to have a foreigner investor as a shareholder at this point in time. We want to grow larger and add more profits, but we have to consider the timing, and the international arena is not at its best in terms of investments and financial products that we can use.

What is your vision for CMH in the next five years?

Our goal is to double our output and revenues. Of course, to be able to do that, we have to improve the production conditions. Once you are producing from the fields, the process becomes harder because costs increase. Gas is a business that depends on pressure—once the pressure in the field declines, increasing it drives up the cost of production. Our output must increase to be able to cover and maintain a certain level of profitability. We want to expand and increase the capacity of our technical staff so that they understand the business and increase the dividends of our shareholders. We do expect that by the end of 2013 we will be able to achieve these goals. The company is growing, but this progress is not reflected in the dividends to our shareholders. We expect improvement in terms of dividends to be paid to our shareholders in 2012, and that this trend will continue in the future.

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