Pande goes to America's Enron.

Author:Mason, Douglas
Position:Enron Corp. to develop Mozambique's Pande gas field

Development of the giant Pande gas field, which was first discovered in 1961, now seems certain to go ahead. A recent agreement with Enron of Texas gives the American gas giant the go-ahead to negotiate with customers in South Africa. But, as Douglas Mason reports from Maputo, not everyone is convinced of the cost-effectiveness of gas compared to oil.

Development of the Pande Gas field in Mozambique has moved closer following the conclusion of a deal between the Government and the US multi-national gas company, Enron Corporation of Houston, Texas. The deal, signed in Maputo on November 13, and attended by US Secretary of State for African Affairs Mr George Moose, clears the way for Enron to enter into agreement with customers in South Africa and begin the development of the project.

This includes the development of the gas field and the financing, building and operation of a 900km trans-border pipeline across Mozambique to South Africa's industrial heartland at Gauteng at an estimated cost of $700m. Once onstream, the field will generate estimated sales of $200m, more than doubling Mozambique's current annual exports. The projected timetable for completion of the pipeline and the commencement of production is 1998. Financing for the deal will include equity and debt of "varying proportions" say Enron officials.

Development of the project has been held up by efforts to secure contractual agreement with feed stock customers. South Africa's giant utility, Eskom, earlier declined agreement to use Pande gas for electricity generation due to the cost competitiveness of coal fired stations using domestic reserves. Enron officials, however, claimed they were confident that agreement with customers in South Africa can be found shortly. One observer close to the negotiations said that Enron "wouldn't have come this far if there wasn't a deal with customers already lined up".

One possible "anchor customer" includes a potential minerals benefication mega project in South Africa. The Industrial Development Corporation of South Africa (IDC) has undertaken a pre-feasibility study for a plant at Phalaborwa, Northern Transvaal, using Pande gas to convert magnetite to iron carbide in a development costed at $800m. Using locally stock piled magnetite from the Phalaborwa Mining Company, the plant would generate an estimated $250m in foreign exchange annually. Acting as a lead agency in identifying the project, IDC is still in talks with potential partners who...

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