ENERGY, EXTRACTIVE INDUSTRIES INVESTMENT INCREASING

UNCLAS MAPUTO 000511

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EMIN ENRG EPET ETRD EINV KNNP MZ
SUBJECT: ENERGY, EXTRACTIVE INDUSTRIES INVESTMENT INCREASING


1. (U) Summary: The GRM recently hosted its first
international conference on extractive industries and the
energy sector, with representatives of more than 100
multinational companies in attendance. Mozambican ministers
highlighted opportunities in energy generation and
transmission, petroleum, natural gas, coal, heavy sands and
uranium. U.S. companies are already considering
multi-billion dollar projects, led by Houston's Anadarko
Energy and Ayr Logistics of Dallas. The high level of
participation in the conference suggests that international
business views Mozambique's possibilities in these sectors
with increasing interest. Should just a few of the projects
that the GRM highlighted at the conference come to fruition,
there is real potential to transform Mozambique's economy,
but only if the GRM practices responsible stewardship and
honors its commitment to adhere to the tenets of the
Extractive Industries Transparency Initiative. End Summary.


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Hydroelectric Generation, Energy Transmission
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2. (U) Inaugurating the conference, Energy Minister Salvador
Namburete noted that in 2007, the GRM acquired an 85%
ownership in the Cahora Bassa Hydroelectric company (HCB)
from the Portuguese government. He said the the GRM is
actively seeking investors to build a northern powerhouse at
the dam--the 2250 mW southern bank powerhouse is currently in
operation--and to construct a second dam lower down the
Zambezi River at Mapanda N'cua. Namburete pointed to the
increasing regional demand for power, especially in South
Africa, and suggested that Cahora Bassa has the potential to
supply energy to a third of Africa. Namburete also
highlighted the GRM's plan to modernize the national
electricity grid in 2009 and 2010 as an opportunity for
investors.

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Petroleum
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3. (U) Natural Resources Minister Esperanca Bias next told
participants that the GRM anticipates ten companies involved
in oil exploration in Mozambique to invest approximately USD
284 million in 2008 alone. She highlighted Houston-based
Anadarko as one of the shining examples, and mentioned its
plans to invest over a billion dollars in the next five years
in the Rovuma Basin, which company officials told Emboffs is
similar to the geological make-up of the oil fields in
Nigeria. Rafique Yusob, director of the Mozambican Center
for the Promotion of Investment (CPI) also said in his
presentation that with the significant international focus on
Mozambique's potential oil reserves, the Institute of
National Petroleum (INP) launched a 'Third Licensing Round'
on December 6, 2007 focused on the Mozambique Basin, that
includes both onshore and offshore blocks. The round would
close on June 1, 2008, having allowed companies 6 months to
make technical evaluations of the blocks and formulate
applications. Namburete also pointed to a newly-signed
agreement for USD 5.5 billion with Texas-based Ayr Logistics
for an oil refinery in Nacala that would include a power
generation facility (septel).

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Natural Gas
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4. (SBU) Minister Bias stated that Mozambique has the
geological potential for the discovery of new gas fields,
even though natural gas is already the most advanced of all
Mozambique's natural resource sectors. She said Sasol
Petroleum International is now the biggest natural resources
producer in Mozambique, and noting that in March 2004 Sasol
made its first sales of natural gas from the Pande and Temane
oil fields in southern Mozambique, of which Sasol holds a 70
percent share. She also recalled that this followed the
November 2003 completion of a central processing facility in
Inhambane province and a gas pipeline to South Africa
finished three months later. (Note: Sasol representatives
told Econoff that in July of this year the company plans to
start drilling two or three wells in deep waters located in
Sofala and Inhambane province for surveying and prospecting
new natural gas reserves. End note.) Bias went on to say
the GRM plans to expand the production capacity of gas by 50
percent from 2010 in the Pande and Temane fields, in the
province of Inhambane. This increase is in response to
growing demand in both Mozambique and neighboring South
Africa.

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Coal
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5. (SBU) Mozambique's coal deposits have captured the
attention of many international companies. Bias said that
Central African Mining and Exploration (Camec) made an
important coal discovery in Tete province, and could contain
868 million tons of processable coal. Furthermore, she
indicated that officials from Coal India would visit
Mozambique in late May to examine a coking-coal mine the
company plans to acquire along with the Steel Authority of
India and three other government-run companies. Brazil's
Companhia Vale do Rio Doce (CVRD) has begun extracting coal
in the long-dormant Moatize coal mine, also in Tete Province.
(Note: CVRD owns 95% of the Moatize concession, with the
Connecticut-based American Metals and Coal International
owning the other 5%. End Note.) Also, Bias said Australia's
Riverdale Mining plans to build a USD 5 billion, 2,000
megawatt coal-fired plant in Tete province, where it is due
to start producing coal in 2010. This project has the
potential to produce 500 megawatts of electricity in 2012 and
would reach full capacity in 2015. In addition, executives
from Missouri-based Peabody Energy have told Econoff they are
looking at partnerships with CVRD for coal extraction, and
representatives from Virginia-based AES have told Econoff
that the company is the preferred bidder for a coal-fired
generation plant, also in Tete.

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Other Minerals
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6. (SBU) CPI's Yusob emphasized that Mozambique has
commercially important deposits of iron ore, titanium ore,
apatite, graphite, marble, bentonite, bauxite, kaolin,
copper, gold, tantalum, and potentially uranium. Two of the
largest investment projects in development are mining and
processing ventures of "heavy sands" deposits by Ireland's
Kenmare Resources, Ireland) and Australia's BHP Billiton.
These projects together will require more than USD 1 billion
in investment in the next five years. In addition, Canada's
Pacific Wildcat Resources announced in April that it has
acquired rights to begin tantalum production and exploration
in north-eastern Mozambique. Furthermore, another Canadian
company, TEAL Exploration & Mining Incorporated, has
announced that the GRM has granted it permission to prospect
for uranium in Cabo Delgado, Alto Ligonha, Lupata, and Tete.
Canadian Embassy officials have told Emboffs that TEAL
believes that Mozambique has major uranium potential.

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Comment: Prudent Stewardship Bodes Transformation
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7. (U) The GRM's first energy and extractive industry
conference in Mozambique was extremely well-attended,
including by important multinational players. The high-level
of participation suggests that the international business
community is eyeing Mozambique's potential in these sectors
with increasing seriousness. If the GRM continues to
strengthen its 'doing business' environment to attract new
investment, and if even just a few of the multibillion dollar
projects that seem to be in the offing actually come to
fruition, Mozambique's economy could be transformed--but only
if the GRM practices responsible stewardship of the windfall.
In this light, continued international efforts to keep the
GRM focused on transparency and anti-corruption measures will
be helpful, as will the GRM's commitment to adhere to the
tenets of the Extractive Industries Transparency Initiative
(EITI).
Jones