André da Silva, CEO, Portos de Cabo Delgado (PCD)

MACIG Connect Series

“Investors will come to Mozambique. Of this we are certain. The potential here is simply too large to ignore.”

Portos de Cabo Delgado is a public entity charged with developing port infrastructure in the Cabo Delgado province. Could you start us off with some background information on the company’s foundation and its function today?

André da Silva (AS): The idea of creating Portos de Cabo Delgado (PCD) first arose when the vast reserves of natural gas were discovered in the north of Mozambique. It was immediately clear that to maximize the potential from these reserves it would be necessary to construct world-class infrastructure around them. The country’s experience with large-scale coal mining has shown that if the necessary infrastructure is not in place, it can have a serious effect on total production, impeding government revenues and slowing down development.

Empresa Nacional de Hidrocarbonetos (ENH), the national oil company, was tasked with developing a strategy to ensure that all necessary infrastructure was in place before gas extraction got underway. In the face of growing interest from foreign private companies, the Mozambican government decided to create a new entity, PCD. The company is co-owned by ENH and Caminhos de Ferro de Moçambique (CFM), the national ports and railways company. Essentially we are a public-sector joint venture.

Our territorial focus is clearly delineated, encompassing only the northern part of the country where the majority of oil and gas activity will take place. We will be concentrating most of our efforts on developing the port of Pemba and Palma marine infrastructure.

The two main facilities that PCD is involved with are the Pemba and Palma ports. What state are these facilities in today?

AS: Palma is the closest shore to the Area 1 and Area 4 gas discoveries. It is a 100% greenfield site, which will require considerable investment. The plan is to build Anadarko and ENI’s liquefied natural gas (LNG) plant in Palma, so it will be necessary to have some marine infrastructure in place to facilitate this construction effort, and then also to export the gas itself when the plant comes online.

At Pemba, there are some facilities in place but it is a very small operation, not specifically designed to cater to oil and gas. Since the first offshore exploration campaigns began a few years ago, multiple service companies arrived in the area and clustered around the port, but with no planning and with insufficient quayline. The result is a disorderly sprawl of yards and offices that struggles to run efficiently.

Looking further ahead, could Pemba also service oil and gas activities in more distant locations, such as Tanzania?

AS: There is enormous potential to convert Pemba into a regional oil and gas hub. It is a natural, deep-water port that does not require dredging. It is located close by to most of Mozambique’s offshore blocks but will also be the nearest such facility for oil and gas activity in neighboring Tanzania. Looking further ahead, the whole of Africa’s Indian Ocean coast will be able to use Pemba as a logistics base for oil and gas. Until now, service providers were forced to work out of Dubai or Cape Town. We will offer a better alternative.

How has the construction effort progressed so far?

AS: We have already started on the phase 1 development of Pemba, which is predicted to run from 2015 to 2018. By the end of this period, we should have an 800-meter quay, 80 hectares of land for commercial use around the port, and 200 residential units. One aspect that was not envisaged in the original plan is that ENI now needs an area set aside for the construction of its floating LNG plant. We are currently examining how best to accommodate their needs. In the near-term, by the end of 2016, we will have 150 meters of quayline ready for use.

For Pemba’s first phase of development, what level of investment are you looking at and where is the capital coming from?

AS: This first phase will require investment of approximately $400 million, which is provided by our patrons. To explain our organizational structure in more detail: PCD is the concessionaire for the Pemba port but we subcontract this role to a partnership between ENH and Orleans Invest, a Nigerian holding company that runs the Onne oil and gas port complex and free zone in Nigeria.

One of the factors that has made Onne so successful is the huge number of service companies that have set up in the free zone around the port. Is PCD already looking to attract companies to the area?

AS: The fact that Orleans Invest is involved in the project is a huge advantage for us because they have a proven track record of developing similar infrastructure. All of the 170 service companies that currently work in Onne will be able to set up at Pemba and immediately understand how the system works. Many major contractors will choose to base their East African operations from our facility.

How will the Pemba port construction help boost local employment and promote development within the broader community?           

AS: As was the case with Onne, we hope to become a hub for employment and technical training in Mozambique. At present, Pemba is still a greenfield site; the only people you will find there right now are the contractors clearing the land and sinking the foundations. We just started piling tests for the marine infrastructure. Once the construction enters a more intensive phase, there will be more opportunities for local employment and then when the port comes online, there will be enormous potential for developing more sophisticated skills among our local population.

What advice would you pass on to other would-be investors interested in coming to Mozambique?

AS: 2016 should be the year in which we get a final investment decision from Anadarko regarding their LNG plant. However, even if the project is delayed, the port facilities will still be needed. It is only a matter of time before these resources are exploited, and when extraction commences the operators will need large-scale marine infrastructure. PCD will already have the necessary facilities in place. If the projects are delayed all that happens is that our investment will take longer to recover. However, this is an investment in the future and all the parties involved have a long-term approach to the enterprise.

Investors will come to Mozambique. Of this we are certain. The potential here is simply too large to ignore. We are eager to play a part in transforming this potential into a reality. Our oil and gas industry is still at an early stage but those companies that get involved at this point stand to make huge returns. PCD will be here ready to support them.

This interview was part of research being conducted by GBR for its Mining in Africa Country Investment Guide (MACIG) 2017. The 2016 edition of MACIG was published in early February and can be accessed here. The GBR team is currently in Mozambique conducting the necessary research and interviews for the mining and oil & gas sectors. To participate in this report, please contact Molly Concannon at mconcannon@gbreports.com or +258 82 559 4115.

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