VZCZCXYZ0016
RR RUEHWEB

DE RUEHTO #0511/01 1541504
ZNR UUUUU ZZH
R 021504Z JUN 08
FM AMEMBASSY MAPUTO
TO RUEHC/SECSTATE WASHDC 8944
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHLO/AMEMBASSY LONDON 0177
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DOE WASHDC

UNCLAS MAPUTO 000511 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EMIN ENRG EPET ETRD EINV KNNP MZ
SUBJECT: ENERGY, EXTRACTIVE INDUSTRIES INVESTMENT INCREASING 
 
¶1. (U) Summary: The GRM recently hosted its first 
international conference on extractive industries and the 
energy sector, with representatives of more than 100 
multinational companies in attendance.  Mozambican ministers 
highlighted opportunities in energy generation and 
transmission, petroleum, natural gas, coal, heavy sands and 
uranium.  U.S. companies are already considering 
multi-billion dollar projects, led by Houston's Anadarko 
Energy and Ayr Logistics of Dallas.  The high level of 
participation in the conference suggests that international 
business views Mozambique's possibilities in these sectors 
with increasing interest.  Should just a few of the  projects 
that the GRM highlighted at the conference come to fruition, 
there is real potential to transform Mozambique's economy, 
but only if the GRM practices responsible stewardship and 
honors its commitment to adhere to the tenets of the 
Extractive Industries Transparency Initiative.  End Summary. 
 
 
--------------------------------------------- 
Hydroelectric Generation, Energy Transmission 
--------------------------------------------- 
 
¶2.  (U) Inaugurating the conference, Energy Minister Salvador 
Namburete noted that in 2007, the GRM acquired an 85% 
ownership in the Cahora Bassa Hydroelectric company (HCB) 
from the Portuguese government.  He said the the GRM is 
actively seeking investors to build a northern powerhouse at 
the dam--the 2250 mW southern bank powerhouse is currently in 
operation--and to construct a second dam lower down the 
Zambezi River at Mapanda N'cua.  Namburete pointed to the 
increasing regional demand for power, especially in South 
Africa, and suggested that Cahora Bassa has the potential to 
supply energy to a third of Africa.  Namburete also 
highlighted the GRM's plan to modernize the national 
electricity grid in 2009 and 2010 as an opportunity for 
investors. 
 
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Petroleum 
--------- 
 
¶3. (U) Natural Resources Minister Esperanca Bias next told 
participants that the GRM anticipates ten companies involved 
in oil exploration in Mozambique to invest approximately USD 
284 million in 2008 alone.  She highlighted Houston-based 
Anadarko as one of the shining examples, and mentioned its 
plans to invest over a billion dollars in the next five years 
in the Rovuma Basin, which company officials told Emboffs is 
similar to the geological make-up of the oil fields in 
Nigeria.  Rafique Yusob, director of the Mozambican Center 
for the Promotion of Investment (CPI) also said in his 
presentation that with the significant international focus on 
Mozambique's potential oil reserves, the Institute of 
National Petroleum (INP) launched a 'Third Licensing Round' 
on December 6, 2007 focused on the Mozambique Basin, that 
includes both onshore and offshore blocks.  The round would 
close on June 1, 2008, having allowed companies 6 months to 
make technical evaluations of the blocks and formulate 
applications.  Namburete also pointed to a newly-signed 
agreement for USD 5.5 billion with Texas-based Ayr Logistics 
for an oil refinery in Nacala that would include a power 
generation facility (septel). 
 
----------- 
Natural Gas 
----------- 
 
¶4. (SBU) Minister Bias stated that Mozambique has the 
geological potential for the discovery of new gas fields, 
even though natural gas is already the most advanced of all 
Mozambique's natural resource sectors.  She said Sasol 
Petroleum International is now the biggest natural resources 
producer in Mozambique, and noting that in March 2004 Sasol 
made its first sales of natural gas from the Pande and Temane 
oil fields in southern Mozambique, of which Sasol holds a 70 
percent share.  She also recalled that this followed the 
November 2003 completion of a central processing facility in 
Inhambane province and a gas pipeline to South Africa 
finished three months later.  (Note: Sasol representatives 
told Econoff that in July of this year the company plans to 
start drilling two or three wells in deep waters located in 
Sofala and Inhambane province for surveying and prospecting 
new natural gas reserves.  End note.)  Bias went on to say 
the GRM plans to expand the production capacity of gas by 50 
percent from 2010 in the Pande and Temane fields, in the 
province of Inhambane.  This increase is in response to 
growing demand in both Mozambique and neighboring South 
Africa. 
 
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Coal 
---- 
 
¶5. (SBU) Mozambique's coal deposits have captured the 
attention of many international companies.  Bias said that 
Central African Mining and Exploration (Camec) made an 
important coal discovery in Tete province, and could contain 
868 million tons of processable coal.  Furthermore, she 
indicated that officials from Coal India would visit 
Mozambique in late May to examine a coking-coal mine the 
company plans to acquire along with the Steel Authority of 
India and three other government-run companies.  Brazil's 
Companhia Vale do Rio Doce (CVRD) has begun extracting coal 
in the long-dormant Moatize coal mine, also in Tete Province. 
 (Note: CVRD owns 95% of the Moatize concession, with the 
Connecticut-based American Metals and Coal International 
owning the other 5%.  End Note.)  Also, Bias said Australia's 
Riverdale Mining plans to build a USD 5 billion, 2,000 
megawatt coal-fired plant in Tete province, where it is due 
to start producing coal in 2010.  This project has the 
potential to produce 500 megawatts of electricity in 2012 and 
would reach full capacity in 2015. In addition, executives 
from Missouri-based Peabody Energy have told Econoff they are 
looking at partnerships with CVRD for coal extraction, and 
representatives from Virginia-based AES have told Econoff 
that the company is the preferred bidder for a coal-fired 
generation plant, also in Tete. 
 
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Other Minerals 
-------------- 
 
¶6.  (SBU) CPI's Yusob emphasized that Mozambique has 
commercially important deposits of iron ore, titanium ore, 
apatite, graphite, marble, bentonite, bauxite, kaolin, 
copper, gold, tantalum, and potentially uranium.  Two of the 
largest investment projects in development are mining and 
processing ventures of "heavy sands" deposits by Ireland's 
Kenmare Resources, Ireland) and Australia's BHP Billiton. 
These projects together will require more than USD 1 billion 
in investment in the next five years.  In addition, Canada's 
Pacific Wildcat Resources announced in April that it has 
acquired rights to begin tantalum production and exploration 
in north-eastern Mozambique.  Furthermore, another Canadian 
company, TEAL Exploration & Mining Incorporated, has 
announced that the GRM has granted it permission to prospect 
for uranium in Cabo Delgado, Alto Ligonha, Lupata, and Tete. 
Canadian Embassy officials have told Emboffs that TEAL 
believes that Mozambique has major uranium potential. 
 
--------------------------------------------- ---- 
Comment: Prudent Stewardship Bodes Transformation 
--------------------------------------------- ---- 
 
¶7.  (U) The GRM's first energy and extractive industry 
conference in Mozambique was extremely well-attended, 
including by important multinational players.  The high-level 
of participation suggests that the international business 
community is eyeing Mozambique's potential in these sectors 
with increasing seriousness.  If the GRM continues to 
strengthen its 'doing business' environment to attract new 
investment, and if even just a few of the multibillion dollar 
projects that seem to be in the offing actually come to 
fruition, Mozambique's economy could be transformed--but only 
if the GRM practices responsible stewardship of the windfall. 
 In this light, continued international efforts to keep the 
GRM focused on transparency and anti-corruption measures will 
be helpful, as will the GRM's commitment to adhere to the 
tenets of the Extractive Industries Transparency Initiative 
(EITI). 
Jones