THE ENERGY SECTOR IN

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THE ENERGY SECTOR IN SUB-SAHARAN AFRICA (SSA)
By H.E. Dr. Salvador Namburete Minister of
Energy Mozambique Oslo, Norway, 13th February
2007
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CONTENTS

• Introduction
• Institutional framework in Africa
• Regional and bilateral cooperation
• Recent developments
• The SADC Region context
• The energy potential in Mozambique
• The private sector participation
• 8. Conclusion

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1. INTRODUCTION
Sub-Saharan Africa (SSA)

• Comprises the whole Continent, except six
  countries in the north
• SAA attaches great importance to access to
  various forms of modern energy
• A shocking fact SSA countries spend 12 on
  energy, while developed countries spend only 2!
• Increasing supply in itself does not meet poverty
  alleviation/eradication and development
  challenges! Price affordability is critical!

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2. INTRODUCTION ( Continued.)

• Despite the abundance of energy resources
• With the exception of South Africa, Mauritius
  and the Seychelles), only 20-30 of urban
  population and 5-10 of rural population have
  access to electricity in SSA
• The remainder relies on woodfuels, which promotes
  deforestation and desertification, in addition to
  the negative impact on peoples health
  (inhalation of smokes and fumes) and the
  environment (air pollution).

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3. INSTITUTIONAL FRAMEWORK IN AFRICA

• The need to cope with radical changes on the
  international energy front has led to
• The evolution of institutions, policies and
  practices to overcome global energy crises and
  their long-term negative impacts on economic
  growth and social development, especially of the
  poorest among the poor
• The need to overcome the national and
  international policy coordination problems,
  jurisdictional arguments and conflicts of
  interest that the prevailing fragmented approach
  to the energy factor has caused
• The gradual engagement of multilateral
  cooperation institutions and mechanisms,
  entrusted with the vital role of promoting the
  development of the energy sector
• The rapid establishment of African cooperation
  institutions, with the view to jointly promote
  sustainable economic and social, development.
  These are
• The African Union (AU)
• African Energy Commission (AFREC)
• New Partnership for Africa Development
  (NEPAD)
• Forum of Energy Ministers of Africa (FEMA).

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4. REGIONAL AND BILATERAL COOPERATION

• High degree of regional energy integration and
  co-operation is critical to ensure
• Collective energy supply security
• Regional competitiveness
• Effective environmental protection.
• The policy measures needed
• AU, AFREC and FEMA should promote Africas
  political stability, secure high country credit
  rating, and improved energy sector governance
• Enhancement of regional electricity exchange
  through bilateral cooperation and the development
  of regional power pools, such as SAPP in
  Southern Africa, EAPP in East Africa, and WAPP in
  West Africa
• Promotion of access to cheaper finished
  petroleum products (LPG, kerosene, gasoline,
  diesel), especially in land-locked countries
• Facilitate system interconnection for petroleum
  products, and encourage the construction and use
  of regional and sub-regional storage and
  transportation facilities to ensure investments,
  job creation and income generation.

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5. RECENT DEVELOPMENTS

• The Oil Sector
• Promotion of investments in the downstream
  industry (refining, distribution and marketing)
  to increase the availability of refined products
  and reduction of consumers price
• Petroleum products represent approximately 70 of
  sub-Saharan Africas total commercial energy and
  can account for up to 33 of foreign exchange
  earnings
• In Southern Africa, the Mozambique-South Africa
  800 km gas pipeline has been developed and is
  currently in operation
• The West Africa Gas Pipeline (WAGP) to supply
  Benin, Ghana and Togo with Nigerian gas is
  underway
• Studies on Kudu gas in Namibia for power
  generation are underway

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6. RECENT DEVELOPMENTS

• The Power Sector
• East African Power Pool (EAPP) plans to
  interconnect the grids of Kenya, Uganda and
  Tanzania, as well as the SAPP grid
• A feasibility study for building a transmission
  line inter-connecting Mozambique and Tanzania is
  under preparation
• The West African Power Pool plans to interconnect
  the
• utilities of Cote dIvoire, Nigeria, Benin,
  Togo and Mali.

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7. THE SADC REGION CONTEXT

• Southern Africa Development Community (SADC)
  established the Southern African Power Pool
  (SAPP) in 1995
• The goals i) use synergies to maximize the
  regional resources for the consumers while
  preserving the environment ii) adopt sound
  economic, social and environmental practices
  conducive of a competitive regional market to
  attract power intensive investments, and ensure a
  sustainable energy development
• SAPP first region outside Europe and North
  America to arrange a power pool for coordinated
  trading and investment in utility expansion.

Population 235 million
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8. MOZAMBIQUE THE ENERGY POTENTIAL
COAL
Total 74 millions TJ COAL 2,400 millions
tonnes Gás 127,000 millions m3 HYDRO 12,500 MW

NATURAL GÁS
HYDRO
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8. MOZAMBIQUE THE ENERGY POTENTIAL
(Continued)Power Generation
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8. MOZAMBIQUE THE ENERGY POTENTIAL
(Continued) Power Projects With Feasibility
Studies
Moatize 1500 MW 1,900 MUSD
Cahora Bassa North 850 MW 380 MUSD
Lúrio 183 MW 360 MUSD
Mphanda Nkuwa 1300 MW 1,900 MUSD
Mavuzi Chicamba 92 MW 38 MSD
Temane 750 MW 600 MUSD
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8. MOZAMBIQUE THE ENERGY POTENTIALOIL AND GAS
SECTOR UPSTREAM

• Oil and Gas Exploration
• Rovuma Block ( 2005-2006 Under Licensing Round)
• Exploration Production Contracts (EPCs) for
  Concession Areas 1 and 4 signed December 2006
  with Anardarko (USA) and ENI (Italy)
• EPC with Norsk Hydro for Concession Areas 2 5
  signed mid 2006
• EPCs for Zambezi onshore, M-10 and Sofala Blocks
  signed November 2006 with BANG (USA)
• Inhaminga Block (Sofala) concessioned to DNO
  (Norway)
• Zambezi Offshore Block (Zambezi Delta)
  concessioned to Petronas (Malaysia), ENH,
  Petrobras (Brasil) and PetroSa (SA)
• Pande/Temane and Blocks 16 19 concessioned to
  Sasol and ENH
• Buzi Block and other onshore and offshore Blocks
  are free.

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8. MOZAMBIQUE THE ENERGY POTENTIAL
(Continued)OIL AND GAS SECTOR - UPSTREAM

• Natural Gas Discoveries and Reserves (GIIP, Bscf)
• 1st discovery in 1961 Pande (G-6)-----?3,470.7
• 2nd discovery 1962 Buzi ..G-9 (Bcm)------? 1.5
• 3rd discovery 1967 Temane-G-68 -----? 89.03
• 4th discovery 2003 Temane East G-6East
  --------------------------------------------------
  ------? 1,338.6
• 5th discovery 2003 Inhassoro G-6-----? 379.31
• Condensate Reserves
• Proven reserves 292,406.6 bbls additional
  1,175,792 bbls from the gas bearing zones
• Most likely (probable) reserves1,278,488 bbls
  additional 2,543,956 bbls from the gas bearing
  zones.

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8. MOZAMBIQUE THE ENERGY POTENTIAL (Continued)
The Temane-Secunda Pipeline
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8. MOZAMBIQUE THE ENERGY POTENTIAL (Continued)
OIL AND GAS SECTOR - DOWNSTREAM

• Petroleum Products Distribution/Commercialisation
• Around 700 000 m3 of petroleum products per
  annum, through international tendering process
• 12 Oil Companies operating in the distribution of
  petroleum products of which only one is national
  (PETROMOC)
• Need to improve distribution infrastructure
• Need for construction of LPG terminal and storage
  facilities and
• Need for construction of an oil refinery

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8. MOZAMBIQUE THE ENERGY POTENTIAL
(Continued)RENEWABLE ENERGY POTENTIAL

• BIO-FUELS
• In Mozambique we have decided to embark on a
  modern bio-fuels programme based upon the
  potential benefits of these systems such as i)
  They can be used to substitute conventional forms
  of energy with no or minimal adaptation ii) They
  are labour intensive, and can create agricultural
  and agro-industrial employment, self-employment,
  and income iii) Mozambique has 36,000,000 ha of
  arable land, of which only 9 is under
  cultivation, abundant labour and water with which
  to produce bio-fuels namely, bi-oethanol (sugar
  cane, and sweet sorghum) and biodiesel (copra
  oil, cotton seed oil, sunflower seed oil and
  jatropha curcas seed oil) without threatening
  food production and food security iv) Potential
  markets for surplus bio-fuels, in particular,
  bio-ethanol have been identified in a number of
  countries, including in Europe.

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8. MOZAMBIQUE THE ENERGY POTENTIAL (Continued)
HOW TO REALISE BIO-FUELS BENEFITS

• GoM has already adopted appropriate legislation
  for introducing biofuels
• Engage the private sector and establish
  public-private partnership
• Encourage cross-sectoral cooperation in
  Mozambique between ME, MINAG, MCT, MIC,
  Universities, Banks, civil society, NGOs, among
  others an inter-institutional forum comprising
  most of these entities has been established by
  the GoM under the coordination of the Minister of
  Energy
• Cooperation with development partners to
• Attract Investments
• Develop the required legal and economic framework
  (an MOU with Swedish entities has been signed and
  cooperation with the World Bank in this regard is
  underway a new trilateral initiative involving
  the UK, Brazil and Mozambique is taking shape,
  and a series of meetings have been planned for
  the coming days to develop this initiative we
  have offered to host the coordinating unit of
  this initiative at our Capital City of Maputo
• Deploy Kyoto Protocol mechanisms and other
  instruments in the bio-fuels sector.

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8. MOZAMBIQUE THE ENERGY POTENTIAL PHOTOVOLTAIC
SYSTEMS

• We are equally looking at electrification using
  alternative sources of energy, in particular
  photo-voltaic solar systems
• Two pilot projects have been successfully
  implemented, being one in the South and one in
  the central region of our country
• This has allowed the provision of electricity to
  schools, clinics and water pumping systems in
  areas where the power from the national grid is
  not yet available these systems are currently
  being replicated throughout the country in 300
  rural schools and clinics during 2006
• Because poverty has a face in Mozambique and that
  is the face of a woman, the provision of water
  and power, and the electrification of schools in
  isolated areas has a strong gender content women
  and girls will now save time from collecting
  water and firewood, and that time will be devoted
  to other things such as taking better care of the
  family and going to classes in the evening, which
  is in line with our approach to gender
  mainstreaming.

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9. MOZAMBIQUE THE PRIVATE SECTOR PARTICIPATION
IN ENERGY

• The energy sector is open for private sector
  participation
• A significant number of private sector projects
  have been implemented, such as
• The Temane natural gas project
• The MOTRACO power transmission line
• The northern Inhambane power system
• The distribution of oil products in the country
  (currently 12 companies)
• The Mphanda Nkuwa Hidroelectric Project, the
  Moatize coal fired thermal power plant, the
  thermal combined cycle natural gas fired power
  plant in Temane, and many more, are in
  preparation and are open to private sector
  participation
• The legal and regulatory environment is
  favourable
• The electricity Law (Law nº 21/97 and its
  regulation
• The Petroleum Law and its regulation
• The natural gas commercialization and
  distribution regulation
• The CNELEC (electricity regulator) under
  gradual implementation

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10. CONCLUSION

• The success of the energy factor within the
  context of Sub-Saharan Africa as measured against
  its effectiveness in addressing poverty, will
  depend on all of us recognizing certain economic
  facts of life, among which tariffs to minimize
  social inequities, minimum loss and wastage in
  delivery of energy services and an internally
  generated re-investment in technological
  upgrading and capacity creation for the poor
• The energy factor in poverty alleviation implies
  a focus on sustainability of energy systems and
  the ability to provide energy services that can
  support the achievement of socio-economic and
  environmental goals
• The issue of price affordability Sub-Saharan
  African governments do their utmost to take
  electricity where they believe it is needed. But
  very often an attempt to solve the of lack of
  access to electricity in a certain region have
  perverse results, when people know that there is
  electricity in their town or village but they
  cannot afford to pay for its use!
• This renders the situation worse than when there
  is no electricity at all. So, the challenge is
  how to expand the provision of electricity
  services at affordable prices!

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10. CONCLUSION (Continued)

• The region needs substantial investment in the
  power sector both in generation and transmission
• The regional market, both bilateral and short
  term, are favourable for new power development,
  including the expansion of SAPP grid
• Mozambique is geographically well located, for
  the exploitation of its energy natural resources
  potential, attractive investment laws and climate
  and therefore offers a great opportunity for the
  investor community (individually, or in
  partnership)
• There is a call for an imperative to urgently
  focus on capacity building for public and private
  institutions involved in energy sector decision
  making and influence
• A number of private sector projects are already
  underway and a few others have just been
  approved. A range of projects of all sizes where
  the private sector is invited to participate.

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10. CONCLUSION (Continued)

• We strongly believe that efficiently used energy
  has a very important
• role to play in the fight against poverty. Our
  vision is based upon three
• major pillars, namely
• Development of Basic Infrastructure for public
  supply of energy, such as rural schools and
  clinics, water supply systems, among others. The
  level of access to electricity is among the
  lowest (9.0, in 2006). We plan to achieve 15-20
  over the next 10 years, which is still not
  enough.
• We have been able to rebuild all the
  transmission infrastructures destroyed during the
  destabilization war, which enabled us to expand
  our transmission grid from about 300km at the
  time of our independence in 1975 to more than
  5,000km today.
• We have been able to complete in July 2005 the
  interconnection of our 10 provincial capitals on
  the basis of our Electricity Master Plan, which
  was adopted in 2004.

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10. CONCLUSION (Continued)

• Our concentration now is on rural
  electrification, with a view to providing the
  power that is necessary to unlock the countrys
  enormous potential in agriculture and tourism,
  through the connection to the national grid
  (RNT)
• Promotion of Productive Use of energy for income
  generation, particularly in rural areas through
  the generation of employment, including
  self-employment, in agriculture, agro-processing
  of fruits and vegetables in micro, small and
  medium-sized businesses
• Development of electricity-intensive
  mega-projects as anchor projects to attract other
  industrial activities for economic and social
  advancement.

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10. CONCLUSION (Continued)

• The Mozambique hydropower projects are the most
  competitive in the SADC region
• Mozambique plays a vital role for energy
  solution in the SADC region
• The potential for large scale bio-fuel production
  in Mozambique is enormous and needs to be
  exploited. The experience so far is very
  encouraging.
• The Government of Mozambique is strongly
  committed to the success of this programme at the
  highest political leadership (HE President
  Guebuza is leading personally the national
  campaign for the cultivation of jatropha curcas
  in the country)

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10. CONCLUSION (Continued)

• Macro-economic and political stability prevails
  and is strengthening
• Mozambique and Norway enjoy excellent cooperation
  relationship that form the basis for the
  development of economic cooperation including the
  participation of private sector.
• Large and fast growing regional markets for
  liquid fuels, including bio-fuels
• The country also offers excellent conditions for
  leisure, including our natural hospitality,
  gastronomy, beaches and safaris for you to enjoy
  in between your business activities
• We, therefore, would like to reiterate our
  invitation to all of you to come and join hands
  with us in our efforts to eradicate absolute
  poverty while you make money through the
  production of bio-fuels, prospecting and
  exploration oil and natural gas, and investing in
  power projects for the benefits of the all region.

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Thank YOU!

• Ministry of Energy
• Address Av. 25 de Setembro 1218, P.O.Box 1381
• Maputo, Mozambique
• Phone[phone]
• Fax.[phone]
• E-mail snn_at_me.gov.mz
• snamburete_at_yahoo.com