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LNG OPENS MANY
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The Liquefied natural gas (LNG) sector in Mozambique opens up a myriad
of opportunities for South African suppliers, writes Duncan Bonnett,
director at Africa House.
M
ine closures, retrenchments, declining industrial
output, a construction sector in torpor and no
apparent short-term solutions for these ills paints a
grim picture for suppliers of goods and services into South
Africa’s extractives, construction and civils sectors. Our
neighbour may just have answered our prayers.
According to estimates, USD64-billion is only half of what is
expected to be spent on developing the Afungi Peninsula
(about the size of Umhlanga in a South African context) and
linked areas over the next decade as Cabo Delgado Province in
Mozambique’s remote far north is transformed into the world’s
next major LNG supplier.
The roughly USD130-billion that is expected to be spent on
delivering eight LNG trains and the floating LNG project by
2029 also represents only half of the proposed 16-train project
envisaged over the longer term.
So what? I’ve heard many companies asking this, with the
common rejoinder that South Africa is not an oil and gas specialist
market, so we’re not natural suppliers – or that the projects have
been kicking around for years and won’t go ahead. The reality is
completely different: the FLNG project (limited opportunity) is
well underway, which will bring major revenues into government
coffers in the next couple of years, whilst the Area 1 project, led by
Total, is now gathering pace.
A few basic facts about the project:
• Within three years there will be up to 50 000 workers on
site, all needing to be fed, secured, entertained and kept
healthy. South African companies are involved in the initial
camp sites that are being built to house the workers that will
build the main camp sites. Workers on site will also require
protective clothing and the like over the build, operation and
maintenance period;
• LPG supplies are needed for at least five years for these sites;
• For example, an estimated 2 million eggs a month will be
required – from over 50 000 laying hens!
• Access control to the site will be key to ensuring safety of
workers and a controlled environment;
• Around 60 000 tons of steel will be required for the first two
trains in Area 1. South African companies are bidding for this,
but in addition, a lot of formwork, cranes and other lifting
gear will be needed to erect the trains.
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This is the kind of activity that South African companies
supply into regularly, whether on our mines or the major
power stations being built, so there is no reason that we can’t
supply into Mozambique’s massive opportunity either. Indeed,
in the last six months, Africa House has taken over 100 South
African-based companies to meet with the project developers,
financiers, EPC contractors and key sub-contractors in
Mozambique and globally to assist them in accessing
potential business. The response has been very positive – but
there are a number of caveats to this if companies want to
supply into the projects.
First, these are global projects and the contractors have global
supplier databases – so it’s very competitive. Potential suppliers
have to register with all the key players involved and register
properly. Mailing a company profile will not work. In addition,
direct contact with key procurement teams is critical.
Second, quotes need to be done timeously and to the spec asked
for. Companies that submit different specs or take too long with
too many queries, will quickly be forgotten. In addition – always
quote in a global currency, buyers in Milan, London, Houston or
even Maputo are not interested in Rand-denominated quotes.
Third, payment terms are determined by the buyers. There are
frequent complaints that South African companies are too
demanding around deposits and final payments which deters
buyers from engaging with them.
Fourth, our locations should be a great advantage to supply
quality products to the projects with short lead times compared
to our competitors in Europe, the Middle East and Asia – but we’re
not reacting quickly enough.
Finally, local content and preferential procurement is a reality.
Companies that are located in the project area will have far better
chances of supplying goods and services into the projects, given
the time pressure that the EPCs and their sub-contractors are
under to deliver gas by 2023/4.
In the words of the procurement director at a major EPC involved
with Area 1, “South African business needs to change its DNA
if they want to secure large orders.” Our industrial base was
built largely on big projects – mining, petrochemical, power
and infrastructure – and it can benefit enormously from these
developments, if our companies are geared up for it.
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African Mining February 2020
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