The African Renaissance Pipeline Project: Linking Mozambique with the Wider Region

Mozambique has uncovered vast natural gas volumes within its offshore basins, in which recent developments have resulted in the East African country emerging as a major global gas competitor. With approximately 100 trillion cubic feet of proven natural gas reserves and the construction of large-scale gas processing infrastructure in progress, the country has the potential to address energy needs across the region by ensuring a viable liquified natural gas (LNG) supply. The proposed African Renaissance Pipeline (ARP) Project, therefore, seeks to link Mozambique’s budding LNG supply with increasing demand in the wider region through the establishment of a cross-border, terrestrial gas pipeline from Mozambique’s Rovuma Basin to Springs, in Gauteng, South Africa.

The ARP was forged by joint venture agreement among Mozambique’s National Hydrocarbon Company; Profin Consulting Sociedade Anónima, a private sector consortium; South Africa’s SacOil Holding Ltd.; and Chinese international pipeline construction company, China Petroleum Pipeline Bureau. With an annual capacity of 18 billion cubic meters – equivalent to 13.2 million tons of LNG – the ARP will span 2,600km, composed of 2,175km through eight provinces in Mozambique and 425km through two provinces in South Africa. Scheduled for completion in 2025 for the Mozambican segment and in 2026 for the South African segment, the pipeline will link Rovuma Basin gas fields in northern Mozambique with South Africa. With additional offtake points for branch lines to major cities and towns in Mozambique and along the pipeline route, as well as extensions to Eswatini, Zimbabwe, Zambia, the Democratic Republic of the Congo, Botswana and Malawi, the completion of the pipeline stands to establish a direct gas transportation route to the greater region.

Feedstock options for the ARP lie in the Rovuma and Mozambique Basins, in which the ARP’s annual capacity is projected at 18 billion cubic meters. There is also the potential for new discoveries from onshore and offshore blocks currently under exploration in the Mozambique Basin. The ARP’s total project cost is estimated at $7.98 billion, in which a financing structure of a 70:30 debt/equity ratio will drive project development.

The proposed ARP will service the entire natural gas value chain, providing opportunities for direct energy – including commercial, industrial and domestic power generation – gas feedstock for conversion processes and transportation fuels. Accordingly, primary target markets for the pipeline are Mozambique and South Africa, in terms of its ability to stimulate downstream, agriculture, energy, mining, manufacturing, real estate and transport sectors. Secondary target markets include demand from additional sectors in Mozambique and South Africa, as well as other member states within the Southern African Development Community.

In November 2020, project developers applied for a concession to build, own and operate the ARP infrastructure system, submitted to the Government of Mozambique, in which the application remains under consideration. The ARP will enable the region to significantly expand its electricity access by creating an accessible energy source for a large portion of the population. In conjunction with climate-friendly transportation processes, the ARP will significantly reduce oil import bills for all affected countries. Additionally, the ARP is expected to boost international competitiveness of Southern African economies, spur job growth and catalyze industry across strategic sectors.

The ARP has been deemed a viable investment project and is expected to provide strong returns for investors. What’s more, the pipeline has the potential to leverage an estimated $63 billion in upstream and downstream petrochemical industries, related investments and multipliers. In terms of return on investment, the ARP project stands out with its assurance of export diversification and protection against external shocks typically characteristic of the global LNG trade.

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