1. A Pathway for Mozambique: From Reserves to Production to Prosperity
Presentation by Sara Menker, Founder and CEO of Gro Ventures
27 February 2013
Confidential

2. Mozambique’s Natural Gas: The Facts
Offshore drilling began in 2009 and Anadarko announced a small discovery early 2010
2010 – 2011, 7 out of 9 wells that were drilled discovered significant amounts of gas
2012: one-third of global oil and gas discovery volumes were in Mozambique
61% of discovered volumes were in Sub-Saharan Africa.

3. 2012: The Year Mozambique Became a Natural Gas Superpower
The Natural Resource Curse and Challenges for Mozambique
Ten Largest Discoveries of 2012
Reframing the dialogue around natural resources in sub Saharan Africa: Mozambique is not being challenged with a curse, but is being presented with an opportunity
Capturing this opportunity requires Mozambique to implement specific policies and initiatives
Source: WoodMackenzie

4. Mozambique’s Natural Gas: The Facts
Area 1 Estimates
Reserves: 50 TCF
$28bn= Amount that will be spent over the next 30 years producing a portion area 1 gas that is sufficient for a 2-train LNG Project (11.1 TCF)
$18.5bn= Cost of a 2-train LNG Project
$17bn= The government’s profit share the 20 year production period
$16bn= Income tax revenue

5. Mozambique’s Natural Gas: The Facts
Area 4 Estimates
Reserves: 42 TCF
$28bn = Amount that will be spent over the next 30 years producing a portion area 4 gas that is sufficient for a 2-train LNG Project (11.1 TCF)
$18.5bn= Cost of a 2- train LNG Project
$18.5bn= The governments profit share during the 20 year production period
$16bn= Income tax revenue

6. Natural Resources as Opportunities, Not Curses
Data from the World Bank, Graph powered by Google

7. Capturing Opportunities
The only way for Mozambique to succeed in capturing natural resource opportunities is if the Mozambican government initiates sound policy reforms while strengthening its institutions

8. Institutional and Regulatory Reform
Regulatory framework must be consistent and finalized
Fiscal policy stabilized
Policy stabilization and regulation will lower risk premiums
Contracts must be legally enforceable and financially sound

9. Commercialization
Further commercializing ENH, INP and their subsidiaries
ENH has 10% ownership in Area 1 and 15% ownership in Area 4
Carried through exploration phase
Further commercialization essential to access the funding required to participate in development

10. Service Providers to the Coal and Gas Industries
Cost competitiveness is essential to LNG. East Africa’s infrastructure is consistently lacking and the local service sector is non-existent
Important to increase the number of national and international service providers
Nigeria: > 400 oilfield service companies. It is the only sub Saharan country with a substantial home-grown industry

11. Emphasis on Local Content
Inclusion of provisions requiring operators to be socially responsible, use local content and employ Mozambicans
The kkey is to act immediately with regards to education. The opportunity costs of waiting are high
Short-term costs: longer project lead times, higher costs and lower project values
Long-term benefits: strengthened infrastructure and heightened competitiveness

12. Emphasis on Local Content
Qualitative Summary of Local Content Approaches in sub Saharan Africa
Source: Wood Mackenzie

13. Downstream Opportunities
Maximizing resource value:
Multi-use infrastructure important: especially railroads, which should be operated independently and not by resource extractors
Gas monetization options: Liquefied Natural Gas (LNG), Gas to Liquids, Pipelines, Power Plants, Fertilizer Plants, Chemicals, etc.

14. Diversify Funders
Large infrastructural projects need to be funded by diverse actors, beyond traditional developmental financial institutions (DFIs)
DFIs alone cannot meet the funding requirements of ENH, let alone all infrastructure projects.

15. Revenue Management
Ensuring new revenue is managed efficiently and transparently, and invested in a responsible way with a focus on:
Education
Agriculture
Infrastructure
Banking and financial services
Telecommunications
Creation of a sovereign wealth fund

16. Mozambique’s Natural Gas: The Facts
Area 1 and Area 4
The calculated costs and revenues were assuming only two 2-train projects. Area 1 alone has sufficient gas for 4 as does Area 4
The reserve figures are still growing for both fields
Area 1 Estimates
Reserves: 50 TCF
$28bn= Amount that will be spent over the next 30 years producing a portion area 1 gas that is sufficient for a 2-train LNG Project (11.1 TCF)
$18.5bn= The cost of a 2-train LNG Project
$17bn= The government’s profit share the 20 year production period
$16bn= Income tax revenue
Area 4 Estimates
Reserves: 42 TCF
$28bn = Amount that will be spent over the next 30 years producing a portion area 4 gas that is sufficient for a 2-train LNG Project (11.1 TCF)
$18.5bn= The cost of a 2- train LNG Project
$18.5bn= The government’s profit share during the 20 year production period
$16bn= Income tax revenue

17. Summary
Natural gas in Mozambique becomes an opportunity, not a curse, through:
Institutional and Regulatory Reform
Commercialization
Emphasizing Local Content
Increasing number and capabilities of service providers
Capturing Downstream Opportunities
Diversified funders
Effective Revenue Management