Mining, Oil and Gas Business Opportunities in Mozambique

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1 Mining, Oil and Gas Business Opportunities in Mozambique By: Benjamim Jose de Samussone Chilenge Maputo, July 2013

2 Introduction to Mozambique Geographical location: Southern part of Africa Total area: Km² Long coast-line: Km Population: 21 million: 70% Rural 30% Urban Political Independence: 1975 Democratic Political system Official Language: Portuguese English is widely spoken President of Republic is elected by universal suffrage for 5 years

3 Macroeconomic Indicators INDICATORS GDB Nominal (USD billion) GDP per capita (USD) Average Exchange Rate (USD/MZM) GDP Growth Rate % Average Annual Inflation GDP Growth Rate % Average Annual Inflation GDP per capita (USD)

4 Mineral Resources in Mozambique Potential for Exploration Mozambique largely under explored. Potential for: Heavy Mineral sands Coal Base Metals Pegmatite Tantalite Diamonds Gold Industrial Minerals Hydrocarbons

5 Mineral Resources in Mozambique Our Vision Create wealth from mineral resources and direct it to the sustainable economic and social development of the country The industrial development of the country and the local utilization of its mineral resources Mozambique to become self-sufficient in energy and export surplus of natural gas and petroleum products A strong component of nationals and local enterprises in the mineral resources sector

6 Mineral Resources in Mozambique Our Policy Ensure a sustainable exploration and development of mineral resources Generate mineral resource wealth for Mozambique The industrial development of the country and the local utilization of its mineral resources Add value to the mineral resources through its processing in the country Promote partnerships including the participation of Mozambican private enterprises in the Sector Periodical update of the legal and fiscal framework to keep the attractiveness for the investment in Mozambique Training and institutional strengthening Note: According to the Mozambican legislation mineral resources includes hydrocarbons (oil and natural gas). The Petroleum activities upstream fall under the Ministry of Mineral Resources

7 Geological Data & Mapping 1 B Regional Airborne Geophysical Survey was successful completed (Area A, B, 26,292 km 2 And C, 141,897 km 2 ); C 2 A 3 High Density Airborne Geophysical Survey was Successful Completed (Blocks 1 to 6, Covering 136,218 km 2 ); Demand of the New Geophysical Data by Investors;

8 Geological Data & Mapping (cont.) ESCALE 1: Geological mapping in paper (Hard Copy) Geological mapping in Digital Format (PDF) ESCALE 1: Geological mapping in paper (Hard Copy) Geological mapping in Digital Format (PDF) Geological mapping in Digital Format (SHAPE FILE) ESCALE 1: Maps of events in Paper (Hard Copy) Maps of events in Digital Format (PDF) Maps of events in Digital Format (SHAPE FILE) ESCALE 1: Geological Map of Mozambique in Paper (Hard Copy) Geological Map of Mozambique in Paper (PDF) Map of events and Deposits (JPG) Map of deposits and events of no Metalic Minerals (JPG) Metalogenical letter (JPG) Fanerosoic (JPG) Geomorphological (JPG)

9 Legal Framework for Mining Operations Legal Instruments available: Mining Law nº 14/2002, of June 26; Environmental Regulation for the Mining Activity Decree 26/2004, of June 30; Mining Regulation Decree nº 62/2006, of December 26; Mining Safety Regulations Decree nº 61/2006, of December 26; Mineral Resources Trading Decree nº 20/11; Fiscal Regime Law nº 11/2007, of June 27, for mining operations; Fiscal Incentives Law nº 13/2007, of June 27, for mineral and petroleum operations;

10 Types of Mining Licenses Reconnaissance License valid for maximum of two years non renewable (non exclusive); Exploration License, with a maximum duration of five years and renewable for the same period (with exclusivity); Mining Concession, with a maximum duration of twenty five (25) years, and renewable for a maximum of 25 years; Mining certificate, with a duration of two years; Mining Pass, granted for a term of twelve months and renewed for the same period (artisanal mining). [more than 1,000 mining licences currently issued]

11 Coal Prospects for the future Mozambique is considered as being among the countries in the world with largest resources of coal, in particular of high quality coking coal. Current activities under about 100 exploration licenses. It is expected that at least 3 license holders will soon submit proposals for new Mining Concessions. The building of Infrastructures for the transportation of coal (railways, port facilities) constitute one of the main challenges. There are resources and export market for Mozambique to become one of the main export countries in the world. Mozambique can by 2020 export 50 million tons/yr.

12 Vuzi Large Coal Reserves in Mozambique Main Coal Basins Mecucue Z a m b i a Mucanha Bacias Carboníferas S?ie produtiva 32? 34? 36? Chicoa Z i m b a b w e Sanangoe Mepotepote Rio Chimoio Save Moatize L a g o N i a s s a M a l a w i R i o Minjova M o?a m b i q u e Lunho Lichinga Luchimua Z a m b e z e Beira Luangua Rio Lugenda O c e a n o i n d i c o 0 14? 16? 18? 20? km Niassa Province Maniamba-Lunho Tete Province Mucanha-Vuzi Sanagôe-M Fidezi Moatize- Minjova Manica Province Mepotepote Fig. Bacias carbon?eras de Mo?mbique ( segundo Af onso e Marques, 1993)

13 Heavy Mineral Sands Deposits Moma Mineral Sands Project in production Moebase deposits under development Angoche under development Jangamo - Xai-Xai - Under exploration Chibuto Heavy Sands Available for potential developer

14 Mineral Resources in Mozambique Possible Future Developments Base Metals (Cu,Ni,Zn) Exploration and feasibilities studies Phosphates At Monapo Feasibility studies to produce 3.5 million tons/yr of phosphate and 1,5 million tons/yr of iron Fertilizer Complex under consideration Magnetite and ilmenite Exploration and feasibility studies to produce steel. Estimated reserves 482 milion tons.

15 Petroleum Law 3/2001. Oil and Gas Sector Legal Framework Regulation for Petroleum Operation, Decree No.24/2004. New Model Exploration and Production Concession Contract (EPCC) Strategy for Concession Areas for the Petroleum Operations, Resolution No. 27/2009. Strategy of Development of Natural Gas Market in Mozambique, Resolution No. 64/2009 Regulation for licensing Petroleum installation and activities, Ministerial Diploma No. 27/2009. Environmental Regulation Specific for Petroleum Activity Fiscal Law on Petroleum activities: Law 12/2007. Mining and Petroleum Tax Incentives: Law 13/2007

16 Oil and Gas Sector Types of Concession Contracts Reconnaissance Contract 2years Survey studies, with wells up to 100 meters Exploration and Production Contract Exclusive right to conduct petroleum exploration and production as well as a non-exclusive right to construct and operate oil or gas pipeline systems The exclusive exploration rights shall not exceed 8 years, and shall be subject to provisions concerning abandonment. The exclusive right to develop and produce shall not exceed 30 years, dating from the date of approval of PDO Oil and Gas Pipeline Contract Grants the right to construct and operate an oil or gas pipeline for the purpose of transporting hydrocarbons

17 FISCAL REGIME Laws n.º 11/2007 and n.º 12/2007 Taxes Mining Activities Petroleum Activities Royalty Diamonds 10% Gold, Siva, Platinum and precious stones 10% Semi-precious stones 6% Basic metals 5% Coal and other minerals 3% Oil 10% Gas 06% Condensate - 10% Surface Taxes MT/km2 NA Income Taxes 32% 32% Law n.º 13/2007 Fiscal Incentives Provide for a period of 5 years: exemption on custom duties, VAT and Taxes on specific consumptions.

18 Current Reforms in Progress Mining and Petroleum Laws are under review Fiscal Regime review for mining and petroleum are under public consultation. Following Instruments are under Development: Mineral Resources Strategy Gas Master plan Coal Master plan A tariff methodology for pipelines Policy for Corporate Social Responsibility

19 Strategy for the Development of the Gas Market The Government should assess and promote opportunities for the use of natural gas in the country, substituting of imported liquid fuels and transforming the Mozambican Natural Gas into products that meet market needs; The Government should avoid monopoly situations or conflicts of interest to ensure that natural gas is available to domestic consumers at reasonable prices; The quantities of natural gas to which the State is entitled to through in kind payments of the tax on oil production (royalty) should primarily be allocated to projects with impact on the socio-economic development of the country;

20 Strategy for the Development of the Gas Market The existing and available volumes of natural gas reserves and the regulations of the field of hydrocarbons should be disclosed to public knowledge; The participation of national entrepreneurs must be promoted in the Mozambican natural gas industry. A Gas Master Plan is under development for the Country.

21 SEDI Sedimentary Basins Rovuma Basin Mozambique Basin Maniamba Basin Middle Zambeze Basin Lake Niassa Basin

22 Petroleum Exploration and Production Contracts 12 Concession Areas: -5 in Rovuma Basin -7 in Mozambique Basin

23 Concessions & Concessionairs Pande - Temane ENH (25%) IFC (5%) Sasol (70%) 16 & 19 ENH (15%) Sasol (50%) Petronas (35%) Sofala ENH (15%) Sasol (85%) M10 Sasol (42.5%) Petronas (42.5%) ENH (15%) Buzi Buzi Hydrocarbons (75%) ENH (25%) Area A Sasol (90%) ENH (10%) Mazenga ENH (100%) Onshore Rovuma Anadarko (35.7%) PTT (10%) ENH (15%) Maurel & Prom (24%) Wentworth (15.3%) Area 1 Anadarko (36.5%) Mitsui (20%) ENH (15%) Bharat P. C.(10%) Videocon E. R.(10%) PTT (8.5%) Area 4 Eni (70%) ENH (10%) Galp (10%) Kogas (10%) Area 2 & 5 Statoil (90%) ENH (10%) Area 3 & 6 Petronas (90%) ENH (10%)

24 Pande-Temane reserves of Natural Gas The Development of the Pande-Temane Natural Gas in the PPA area aims at producing natural gas from the holes of the Pande-Temane field, processing it in the Central (CPF) located in Temane and transporting the natural gas to Mozambican and South African markets. Therefore was signed, in October 2000, the Gas Pipeline Contract (PLA) between the governments of Mozambique and South Africa The potential resources in Pande-Temane are approximately 5tcf (trillion cubic feet) of which 3 tcf are proven.

25 STRUCTURE OF NATURAL GAS VALUE CHAIN Exploration Processing Transmission Distribution Marketing Mozambique South Africa C P F INP (Regulator in Mozambique) Field Sasol Petroleum Temane 70% Moz Govt 25% (Via ENH/CMH) World Bank / IFC 5% CPF Sasol Petroleum Temane 70% Moz Govt 25% (Via ENH/CMH) IFC 5% External Financiers Pipeline (ROMPCO) Sasol Gas Holdings (50%) SA Govt 25% (Via CEF/Gas) Moz Govt 25% (Via ENH/CMG) NERSA (Regulator in SA) Market Sasol Gas external markets Sasol Gas internal markets: Spring Lights Gas (49%) Sasol Synfuels Sasol Oil - Tshwarisano 25% - LFB 75% Sasol Chemical Industries ROMPCO: Republic of Mozambique Pipeline Investment Company

26 Rovuma Development - New Discoveries The resource potential in Rovuma basin is of about 170 tcf, currently under evaluation. The LNG project, currently in the pipeline, is the that will justify the investments made in that area, and that can later leverage other projects such as: fertilizers, power generation, production of liquid fuels, and others. Is planned the construction of 10 LNG (liquefied natural gas) trains. The expected gains of the investments in the Rovuma basin are: revenues generation, development of new infrastructure, industrial development, employment, education, hospitals and others. The estimated level of investment in the LNG project in the Rovuma basin is of billion dollars.

27 LNG Development Overview

28 Final Remarks The investment in exploration and development of our mineral resources is welcome and the partnership with local entities encouraged (5 to 20% for large projects is required by Law); Several opportunities exist for the local beneficiation of the existing mineral resources (natural gas, coal, industrial minerals, etc.) ; There are good market opportunities in Mozambique for the provision of services and equipment to the companies carrying out exploration and large scale development activities; The partnership between nationals and foreign entities for the establishment of services companies are encouraged.

29 Final Remarks We recognize that you have know-how, technology and the financial capability required for the exploration and exploitation of mineral resources in Mozambique.

30 Thank You! Muito Obrigado!