Talk of the Town

The National Hydrocarbons Company (ENH) currently acts as a partner rather than an operator in Mozambican oil and gas concessions. How do you see this changing in the future?

The goal of ENH is to become an operator in Mozambique’s oil and gas business within 20 to 40 years. Over the course of that period, Mozambique will gain the technology and human resources necessary to take over field operations. Another area of interest is marketing, and we plan to champion the Mozambican marketing of gas.

What is ENH doing to facilitate that knowledge transfer?

We have 11 concessions in Mozambique, and ENH has shared in each along with international companies. In these joint ventures, there are technical committees that complete the technical review of information. We also have operating committee meetings, which is where all the decisions are made. Looking at the way we are structured, in one concession we have more than one partner—up to three or four. With this amount of interaction we can really learn a lot. In the case of Rovuma, where ENI is the operator, one of the international partners is Kogas, which has extensive experience in LNG as a seller in addition to its shipping business. Its knowledge is being transferred to some entities internally. People from ENI come here and go through the process, and we send people to ENI’s technical academy. They get trained there for a year or two and return. With Anadarko, staff get trained in Houston. We have people in Portugal, too, at Galp Energia Academy, which has been heavily involved in Brazil and Angola. We are also looking for experience from all over the world. We ask ourselves: How did Petrobras grow? How did Sonagas get to the level that it is at now? We are learning from those models and are pleased with the progress we are making.

How would you compare the way that Mozambique is developing its hydrocarbon reserves to the way it has been done in other countries?

We came in early, starting production 10 years ago with just one small field. Today, we have more than 100 tcf of natural gas, which means that we have enough natural resources for four to five generations. This is in contrast to Angola, where Sonagas was given the blocks when 40-year concessions for international companies expired. It started at the end, and had 30 years of production and experience. So the question now is: how do you strategically position yourself to have relevance? The relevance does not come from the resource sitting in the ground, it comes from how it is used. Mozambique is a long, thin country with 2,500 kilometers of coastline. If you build east-west infrastructure, it is easy to connect to the markets of the interior: Malawi, Zambia, and South Africa. These markets will either need energy from Mozambique, or will need natural gas to build their own small industries. Then there is talk of having four LNG trains, which could produce up to 20 million tons a year for international export. For example, Qatar now produces around 47 million tons. We could produce almost 50% of what Qatar is currently managing. A country can become globally and regionally relevant with its resources, and, consequently, access to finance for the country will be better. Agriculture, which is the main driving force of the country’s economy, will receive a boost. When you have all these projects, you have people coming in, you have internal needs, and you improve the production of your crops. The sustainable management of resources leads to the economic development of the country.

How do you confront infrastructural challenges in Mozambique?

These “challenges” are opportunities for investment and growth. Imagine if Mozambique was well developed; how could you build an east-west pipeline? If you have a market and the necessary resources, the infrastructure will come because it is feasible. We are talking about billions of dollars being invested just to get into the market. All this investment in infrastructure is because you need to get the product to the market; to get the east-west pipeline or the containers to transport is a modest investment. It is not difficult; it is different. If one takes a look at other projects, you can see that someone has already solved the problem. You just need to adapt.

What is the current status of the negotiations over the LNG plant?

The current status is that the government and the concessionaires are discussing how the project will be implemented. All the technical aspects are being considered between the two parties. An official public announcement will be made, and plans will come after the final investment decision, which we think will happen some time at the end of 2013.

How does ENH’s involvement ensure that Mozambique is receiving the maximum amount of benefit from the oil and gas industry?

Firstly, we have to make sure that they do not damage the reservoir so we can extract as much as possible from it. From a management perspective, we have the joint operating committee, and all the rules on how the project has to be run are based on that. We have to approve the investments and all technical aspects of the project, not only in exploration, but also in production. Everything has to be properly financed and we have to check whether the cost of capital is high or low. If it is high, we recommend they look for a new source, for example. We participate in the decision-making process from beginning to end. We also monitor the performance of the companies. Today, we have 11 concessions, and five or six years ago we had only one five or six. We monitor each dollar that the company invests as each one will reflect on our revenues. It is the same with our resources; we monitor the amount of gas we are exploiting. For the international companies it does not probably matter. They recover the investment and that is fine, but we are here and have been for more than one generation, so we have to make sure that we extract the maximum in the optimal way.

You are currently working on a project to pipe natural gas to households in Maputo. Do you see downstream playing a bigger role in your portfolio in the future?

That will be part of our portfolio, because for natural gas you need the infrastructure. To build the infrastructure we need for this, we use part of the profit we make upstream, as part of our corporate social responsibility, as it is very expensive to invest in this sort of infrastructure. We want to see the natural gas consumed in Mozambique, and to do that we need to invest in infrastructure. We will need part of our upstream revenue to do that. We have an exit strategy for five or 10 years down the line when we will go through the stock exchange and float most of the shares so that some private investors will become involved through the PPP law.

What oil company do you want ENH to emulate in the future?

It will be the next ENH. In the future, others will look to ENH as a reference. As I mentioned before: either you start at the beginning or you start at the end. Our birth is unique and different from other companies, so others will have to look to ENH as a reference. Then someone will copy the model we have developed. The systems, operations, and management of the company could be comparable with those companies because we have to benchmark those companies if we want to be part of the game; but as a model, ours will be unique.

© The Business Year – December 2013