An Overview of the Gas Master Plan

1. Johannesburg, 21st August 2014 An Overview of the Gas Master Plan MOZAMBIQUE GAS & OIL SEMINAR

2. The Extractive Industry inMozambique • Mozambique is a country with vast potential and a variety of mineral resources including coal, natural gas, gold, titanium, heavy sands, gemstones, base metals, nonmetallic minerals, among others. • Mozambique has huge energy resource potential, which provides a favourable condition for the satisfaction of not only its domestic needs, but also that of the Southern African region. • The sustainable exploitation of these resources gradually begins to contribute to economic and social development of the country.

3. Energy Resources Potential Hydropwer: • The hydropower potential identified is possible to develop more than 18,000 MW of capacity and provide more than 95,000 GWh per year to the electricity market in the country and the region. Coal: • Coal reserves are estimated at more than 20 billion tonnes. • A potential for exploring CBM in the coal exploration areas Natural gas: • Natural gas Potential Resources are estimated at 277 TCF, from wich 170 TCFs have been discovered.

4. Occurrences And Estimates Of Natural Gas In Mozambique * (*) This value has been updated according to the assessment process.

5. Natural Gas Concessions Relinquished areas

6. Gas Master Plan It is an evolutionary technical plan for the development of the gas sector. Provides a detailed roadmap for strategic decision making, policy and institutional nature, the basis of which may be designed and implement investments in a fully coordinated manner. • It's a dynamic tool to guide policy development in the gas sector in Mozambique •   Favors a stable and transparent regulatory regime, fiscal and financial policies so as to promote the development of the gas sector in order to benefit the country as a whole. •   It’s a hierarchy Instrument of development decisions, setting priorities in the allocation and use of natural gas.

7. Value Chain Of Natural Gas

8. The Need • The existing natural resources in the country are to be used in a sustainable manner, ie, combining economic, social and environmental dimensions; • Natural resources should first meet the development needs of Mozambique; • Ensure the use of gas in the domestic industry; • Meet the requests of gas, for the development of new projects.

9. Request for Use of Natural Gas Projects such as: LNG Power Plants GTL ammonia urea methanol Methanol to Gasoline LPG Processing of Tomato Paste Processing of Iron and Steel Sites Proposed for Its implementation: Palma, Nacala, Beira, Ressano Garcia,

10. The Master Plan Framework The Five-year Program of the Government defines its central objective as the fight against poverty with a view to improve the living conditions of the people of Mozambique, in an environment of peace, harmony and tranquillity. 1. Institutional Framework • The Ministry of Mineral Resources (MIREM) is the government entity responsible for promoting the sustainable use of natural gas in Mozambique.  2. Political Framework • In recent years, the Government of Mozambique has adopted several policy instruments and strategies with a view to promote the development and sustainable use of energy resources of the country. 3. Legal Framework • Mozambique has a legal framework to meet the challenges associated with the sustainable use of natural gas, as described below.

11. Vision Develop natural gas resources in order to maximize the benefits to the Mozambican society to improve the quality of life of the Mozambican people, while minimizing the adverse social and environmental negative impacts. Contributing at: • Growth of institutional capacities of the public and national private sector; • Growth and strengthening of industry and national companies in particular for small and medium size enterprises; • Increasing employment across the country; • Investment in infrastructure to support the growth of economic activities, and • Greater access to training and education,

12. Strategic Objectives of the Master Plan The strategic objectives, to be achieved by 2030, can be divided into two strands: • Development of gas: • Production in the offshore Rovuma basin, supported by LNG in Palma. • Continued exploration and eventual production of gas from other exploration areas • Continued exploration for gas in the onshore and offshore Inhambane province.  • A significant contribution of natural gas to the energy supply mix. • Development of an industrial zone in Palma, Pemba, and Nacala, based on the availability of natural gas from production in the Rovuma basin. • Possible fertilizer factory, thermal power plants,  petrochemical industry, and GTL based on gas from the Rovuma basin or additional development in the Inhambane district; • Construction of gas pipelines to support the expansion of SMEs.

13. Strategic Objectives of the Master Plan b) Development of the country on the basis of revenues from gas production and LNG sales: • Diversified Economy; • Construction of large infrastructure projects, in particular, roads, ports, railways, airports and power stations; • Greater industrialization with the emergence of SMEs that leverage off of mega-projects • Increase of skilled labour. Increase of professional services (engineering, design, accounting, etc) in Mozambique, with Mozambican companies beginning to assume positions of leadership in mega-projects • Mozambique as a great tourist destination, based on the combination of its vibrant culture, wildlife, beaches, etc.

14. Pillars of Master Plan Economic and institutional issues  Accelerate the negotiations for the development of gas in the Rovuma Basin and export of LNG Develop and implement a communication plan with a view to increasing transparency and managing the expectations Support the use of natural gas in national industries Strengthen institutional capacities in matters related to natural gas development.  Create national capacity to exploit, market, and develop gas resources and LNG. Funding and fiscal affairs Create and maintain a good business environment Ensure that the share of gas for the Government is taken in-kind and in-cash Environment and social development Ensure that the local communities, in particular in the areas of exploration and production, are benefiting from natural gas-related activities Prevent and/or mitigate the environmental damage resulting from the production and use of natural gas Strengthen the institutional capacity for the implementation of environmental legislation

15. Values In the implementation of the Gas Master Plan, the Government should be guided by a set of values such as: • Transparency. All decisions that will be taken, agreements to be concluded, and all the other government rules and practices should be conducted in a transparent manner and be designed to benefit the society in general. • Impartiality. Under no circumstances will the Government adopt a position which in some way will benefit only a few while doing harm to others, in matters related to the natural gas.  • Social Justice and equity. All the actions carried out in the context of the Master Plan implementation should promote social inclusion. • Participation and information. The Government should promote the sincere participation, in accordance with their capacities, of all those interested in issues related to the sustainable use of gas.

16. Guiding Principles • Regulatory clarity in the energy sector • Sustainable use of revenue • Identification of needs and coordination of infrastructures. • Education and Training • Regional Development • Promotion of SMEs • The use of local resources such as raw materials, national companies and hand labor prioritized national services. • Environmental Sustainability

17. Cross-cutting Issues Investment environment A legal and regulatory framework that promotes the development of gas and that provides the investors with the necessary security of these investments; National unity, peace and stability. The use of natural gas and the sharing of the benefits from gas development must have a national dimension, while considering the need to promote local development.  Environment The Government will ensure that the exploitation of natural gas, its processing, and its use will be conducted in a sustainable manner, reducing to a minimum the negative impacts on both land and sea. Gender and large groups The Government will ensure that the Gas Master Plan contributes toward the development of large groups, particularly children, women and elderly, without prejudice to the development of other groups.

18. Special Considerations The GMP includes the following aspects:   The policy of pricing domestic gas   Mega projects and the policy of allocation of gas   The regulatory policy for the gas sector   The Communication Strategy   The Financial Management and Audit   The Action Plan

19. Action Plan and Final Considerations To achieve the above objectives announced, the Gas Master Plan requires a clear definition of responsibilities and activities of all governmental institutions directly or indirectly involved in various forms of sustainable use of natural gas and its derivatives.   Thus, the document presents in the form of logical framework, activities, responsibilities, indicators and deadlines that must be met for the vision of the GMP, translated into strategic objectives, to be achieved in its fullness.   The GMP was approved on June 24, 2014, pending its publication in the Government Gazette. The electronic version after publication, will be available in the MIREM or INP website (www.mirem.gov.mz and www.inp.gov.mz )

20. Thank you

21. Política de fixação de preços do gás natural para consumo • O preço do gás natural para consumo doméstico deve incentivar o seu uso para o transporte, indústrias domésticas, cozinha e outras utilizações domésticas; • A determinação do preço doméstico do gás natural deve ser na base de leilão, cujos termos serão estabelecidos pelo Governo; • A realização de leilões pretende permitir que os preços do gás natural para o consumo doméstico viabilizem a indústria local, de modo a que Moçambique não seja apenas exportador de matéria prima em bruto. • Os projectos qualificados proporcionarão licitações para: • O volume total de gás solicitado em GJ durante um período de leilão de 20 anos; • O preço de licitação em $/GJ (dólares nominais); e • Factores de agravamento/ajustamento anual do preço de licitação. • As centrais eléctricas que sirvam exclusivamente o mercado doméstico, pequenas e médias empresas e consumidores domésticos receberão gás natural ao preço mínimo doméstico (PMD) mais os custos do gasoduto e de distribuição.

22. Critérios para qualificação e atribuição de gás Prioridade dos projectos Preço do gás superior ao PMD (preço mínimo do gás no mercado doméstico). Quantidade de gás solicitada pelo promotor Calendário para desenvolvimento do projecto Localização dos megaprojectos Desenvolvimento em Palma Qualificações técnicas e financeiras do proponente e do projecto Compromisso do promotor em empregar Moçambicanos Compromisso do promotor de usar fornecedores de serviços e bens Moçambicanos para as instalações Compromisso dos promotores de mitigar impactos sociais e ambientais Responsabilidade Social Empresarial. Benefícios para Moçambique Interesse nacional Preço de venda do produto final no mercado nacional