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The Fundamentals for Success

Presented by : JCA Naude, Managing Director of Sasol Gas

June 2005

Mozambique to South Africa Natural Gas Project :

9th Africa Oil & Gas, Trade & Finance Conference

NOT AN OFFICIAL UNCTAD RECORD

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Pande

Temane

Vilanculos

BEIRA

MAPUTO

Temane and Pande gas reserves- where it all started

Namibia

Botswana

Zimbabwe Temane

Durban

Richards Bay

MaputoJohannesburg

Republic of South Africa

Namibia

Botswana

Zimbabwe Temane

Durban

Richards Bay

MaputoJohannesburg

Republic of South Africa

Namibia

Botswana

Zimbabwe Temane

Durban

Richards Bay

MaputoJohannesburg

Republic of South Africa

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Scope of the US $1.2 billion project

GAS FIELD DEVELOPMENT

Temane / Pande

Nelspruit Komatipoort

Maputo

Beira

Secunda

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GAS PROCESSING FACILITY

Temane

Nelspruit Komatipoort

Maputo

Beira

Secunda

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Temane / Pande

Nelspruit Komatipoort

Maputo

Beira

865 km PIPELINE

Secunda

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Temane / Pande

Nelspruit Komatipoort

Maputo

Beira

865 km Pipeline

Secunda GAS SUPPLEMENTS COAL

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Temane / Pande

Nelspruit Komatipoort

Maputo

Beira

865 km Pipeline

Secunda

CONVERT 500 CUSTOMERS

Sasolburg

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Temane / Pande

Nelspruit Komatipoort

Maputo

Beira

865 km Pipeline

SecundaSasolburg

REPLACE COAL WITH GAS

COMPLETED JUNE 2004

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What made the Project possible

Initial Pande and Temane gas field assessments by ENH

ENH and Sasol partners in developing the Pande and Temane gas fields

Anchor load provided by Sasol

Bi-lateral trade agreement – South Africa and Mozambique

Attractive investment environment

Effective involvement of government entities

Regulatory dispensation in South Africa

Balanced distribution of benefits

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C

P

F

Transporter Buyer / Shipper / Distribution

Field

Moz 30%

Sasol 70%

CPF

Sasol 100%

Moz 30%

Pipeline

Sasol 100%

50% combined option• Moz• South Africa – in process of

exercising 25% option

MarketSasol internal and external markets

Sellers

Shareholding

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Mozambique Country Manager appointed early

Ministerial Steering Committee (Mozambique)

Multi level interfaces with government, NGO’s

Project Liaison Committee

Co-ordinates government department activities

Joint project task teams

What worked well for the Project

Structured interfacing at three levels

Ministerial

Governmental

- National

- Provincial

- District

Community

Social development benefits to communities

Cross border commission

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Stakeholder Interaction

Tailored communication plan

Transparency and mutual trust

Managing stakeholder expectations

Joint committees e.g. Projects, Promotions committee, Ministerial Task, Group and Project Liaison Committees

Community interface forums and a complaints register

Personal contact with Authorities in Mozambique and South Africa

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Environmental Realities

International best practices

Environmental Task Team between Sasol and Mozambique Authorities

Independent Environmental consultantswere appointed

Ongoing consultation with communities and authorities

Respect for cultural symbols and community wishes

Regular environmental audits

Rehabilitation after pipeline construction

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Stakeholder Management / Communication

Communities

South African Government

NGO’s

Local Authorities

Landowners

Media

Community Leaders

Business Partners

South Africa and Mozambique

Mozambican Government

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Financing Agreements

Highly complex hybrid financing-benefits of corporate

loan and project financing

Mitigation of potential political risk

“Project Finance Deal of the year 2004 African Oil and Gas

Bridging finance (from Sasol and Others) while finance

was being arranged

Financial institutions included

Export Credit Agencies

Multilateral Institutions

Commercial Institutions

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Numerous Agreements

Bi-Lateral trade agreements-South Africa and Mozambique

Regulatory/Licensing Agreements

Commercial Agreements includingPipeline Shareholders Agreement

Joint Operating Agreement

Gas Sales and Transport Agreement

Financing Agreements

Construction Agreements

Operating Agreements

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Key Success Factors

Successful negotiation of agreements

Effective involvement of government entities

Supportive legislative environment

Stakeholder involvement

Acknowledgement of key environmental issues

Integrated project management structure

Corporate Social Investment

Servitudes and land issues

Local content

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Corporate Social Investment

Needs identified through consultation with Communities and Local Authorities

More than US$ 6 million was allocated for social investment projects along the pipeline route in Mozambique and South Africa

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Corporate Social Investment – South Africa

Flagship Projects include :

Over 100 Computers to various schools

Mobile Libraries

Wheelchairs and Crutches for the disabled

AIDS support centres and homes

Construction of Classrooms

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Corporate Social Investment - Mozambique

Flagship Projects include :

Primary Schools in various provinces

Sports stadium in Vilanculos

Community Bakeries

37 new water boreholes

Repair of dams

Medical clinics

Community markets

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Local Content

Local suppliers preferredContactors required to maximise the use of local resources205 Mozambican companies received a share (29%) of the projectLocal Content clauses included in the contactsTraining and transfer of skillsJob creation (South Africa)

Total of 430 workers employed for 20 months760 workers at peak of project

Job creation - Mozambique1500 workers were employed during the project 3200 workers at peak of project

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Sustainability of Success

Honour agreements with all parties involved in the project

Comply with all the requirementsof the lending parties

Continue with Social Investment Programs

Government Liaison in Mozambique and South Africa

Community communications and Stakeholder relationships

Comply with all Regulatory requirements

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The Way Forward

Optimisation of volumes from existing gas reserves

Exploration for new reserves

Investigating further gas markets in Mozambique and South Africa

Continued interaction with communities along the pipeline route in terms of sustaining the project

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Benefits of the Project – South Africa & Mozambique

Diversification of energy portfolioEnvironmental benefitsSocial development projectsMajor private sector investment in new infrastructureEmployment and capacity developmentRevenue to Government for 25 yearsOpportunities for black economic empowermentCapacity development (e.g. pipe material)

Unlocking of natural wealthForeign investmentEconomic growthSocial development projectsTaxes / Royalty / Cash bonusSkills developmentEmploymentInfrastructureCapacity development (e.g. transport)

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The Mozambique Natural Gas ProjectNEPAD in action ?

Partnership between African countries Anchoring the development of Africa on its resources Acceleration of regional integration Economic and other benefits to both countriesCapacity building Increased investments Social development Job creation

Indeed, NEPAD in action !

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Mozambique to South Africa Natural Gas Project :

The Fundamentals for Success

Thank You