Mozambican resources: expanding business needs better logistics (Africa Report n°32 – July 2011)

Mining companies need solutions to move coal while new prospectors look for expansion in the oil and gas sector

While there is lots of fanfare about achievements in the Mozambican mining sector, some of it is blind to the facts. Mega coal-mining projects have been launched by Vale SA and Riversdale Mining this year without any guarantee that the transport logistics will be finalised.

The rehabilitation of the Sena railway has not yet produced any positive results, and in February this year national railways and ports chairman Rosario Mualeia announced he was rescinding a contract with the Indian consortium Ricon because it was not doing a satisfactory job.

This was just three months before Vale SA said it would use the same line to ferry 11m tn of coal per year, beginning in July. Riversdale Mining – which has since been taken over by Rio Tinto plc – has a target date of September to move the coal from its Benga mine.

Despite these setbacks, Mozambique has issued more than 100 prospecting licences in the coal sector alone, according to mineral resources minister Esperança Bias. The minister is upbeat that the transport hiccups will soon be overcome.

« Transport logistics are our main challenge, » she said in a recent interview. « A solution will have to be worked out somehow. »

Vale SA has said that to overcome the transport problems on the Sena railway line, it will fund the construction of a railway line connecting its mine through Malawi to the deep port of Nacala. The Rio de Janeiro-based company said it will also invest in the construction of the coal terminal at Nacala port.

Riversdale says its solution would be to barge the coal through the Zambezi River, where it will be loaded on ships before being taken to Beira. This is likely to be a mammoth task: at the end of May, Riversdale announced that the Zambezi River needed dredging to a depth of between 3 and 3.5m. Dredging about 180 km of the river will cost $100m, according to a company official.

Oil and gas. Hopes for commercial oil finds were dampened earlier this year when the ministry of mineral resources said that oil prospected in the Rovuma basin by US company Anadarko plc was of inferior quality and not suitable for commercial purposes. Anadarko and several other international companies have invested as much as $500m in oil prospecting, Bias said. Meanwhile, coal miners like Vale are mulling coal-to-liquid plants which could help lower Mozambique’s fuel-importation costs. Vale’s outgoing CEO Roger Agnelli told reporters that coal of inferior quality could be used in a coal-to-oil plant which could produce as much as l,600tn of oil per year.

While the natural gas sector has attracted a lot of players, only the South African petrochemical giant Sasol has managed to commercialise gas, in partnership with the Mozambican government. At least 95% of the gas mined from the Pande and Temane gas fields is piped to South Africa, while the rest is used for the domestic market.

A new development has been the call by the government for vehicle owners to switch from diesel or petrol to gas. The public transport authority has ordered hundreds of gas-operated buses from China, and state-run hydrocarbons company Empresa Naçional de Hidrocarbonetos (ENH) says it is planning a $241m investment to pipe gas to the Maputo area by 2016.

The state power utility, Electricidade de Moçambique (EDM), is planning to convert two diesel turbines to run on natural gas by 2012, producing between 25 and 36 MW which will be fed into the national grid.

In its plan produced in April 2011, ENH said that it will need 5.7m gigajoules per year to meet industry and domestic demand.

Fred Katerere in Maputo

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