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‘Gas could save local energy sector’

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Stanbic Bank has urged Zambia to capitalise on the discovery of Liquified Natural Gas (LNG) in neighbouring Mozambique to help tackle the country’s energy shortfall.

Aside from the energy potential, the growing LNG industry in Mozambique has created a large market that Zambian businesses could exploit through investment, according to Paul Eardley-Taylor, Head of Oil & Gas for South and Central Africa at Standard Bank, of which Stanbic is a member.

Addressing representatives from the Ministry of Energy and key players in the local energy sector during a Stanbic-sponsored breakfast meeting in Lusaka, Mr Taylor said: “The discovery of natural gas reserves in Mozambique has presented Zambia with an opportunity to diversify its energy mix away from hydropower and promote energy security, which is key to national development.

“In the past, we have been fortunate to have an abundance of low-cost hydropower, but with the direction climate change has taken, hydropower is no longer as assured to Zambia as it used to be.”

He explained that the increasing scarcity of water as a result of frequent drought was making local hydropower stations virtually useless, with dire consequences for the public. 

“For an economy that is heavily dependent on hydropower like Zambia, parched power stations will inevitably result in a serious electricity shortfall. The latest shortage has led to power blackouts lasting up to 15 hours a day, slowing economic productivity.

“To ensure energy security and diversity thereby underpinning the local economy when the rain does not come, the Standard Bank Group, of which Stanbic Bank Zambia is a member, is advocating for an analysis of Liquified Natural Gas as a means of supplementing other sources of energy Zambia is implementing to prevent future power shortfalls – especially if implemented alongside wind and solar power.”

In recent years, there has been a steady increase in global LNG supply, which has coincided with a fall in the price of the commodity. Further, advancements in technology like containerised LNG, LNG trucking and LNG by rail car are making transport cheaper and easier than before.

Given the existing TAZAMA line, it is possible to build a new gas pipeline from Ndola to Dar Es Salaam,  which could supply gas-fired power to backstop hydro/renewables to underpin the Copperbelt’s demand, he said.

Taylor noted that Zambia’s opportunities in LNG also lay in the industry’s huge investment potential for local businesses.

“Thanks to its LNG reserves, Mozambique is expected to be the beneficiary of US$128 billion of investment up to 2025, and by next year will have US$65 billion worth of investment committed. This is a massive opportunity for Zambian businesses, particularly those located in Eastern Province near the border.

“Local farmers can penetrate the Mozambique market with consumer agriculture and industrial services. The market is bound to grow thanks to the LNG sector’s multiplier effect, which also creates vast opportunities for investment in infrastructure, transportation and financial services among other things from which Zambian companies could benefit.

“What is exciting is that Mozambique’s LNG industry is ultimately a private sector credit risk backed by some of the world’s largest oil and gas companies, and is somewhat removed from the country’s sovereign risk,” he added.

Over the past decade, Stanbic Bank has been supporting businesses entering Mozambique through multiple channels like a dedicated incubator for small and medium enterprises that helps Zambian businesses identify and exploit investment opportunities in Mozambique.

Taylor added that LNG did not just represent an energy and business opportunity – it could potentially be the start of significant geopolitical change in the Southern African region over time. This is exciting because it is a real illustration of the ‘Africa rising’ concept.

Strong private public sector partnerships across the Central and Southern African region are needed for the Africa Rising dream to be realised.

“What we have consistently found across several markets is that different Governments have become aware of the Mozambique opportunity at different speeds,” he said.

In this regard, what Standard Bank has done is use its position as Africa’s largest bank to leverage experience and knowledge gained from different markets and assist governments in its markets learn more of the scale of this opportunity.

Since 2012 Stanbic has played multiple roles in Mozambique’s energy sector, providing thought leadership, significant financial support and lending to the LNG projects operating in the country.

“It is this knowledge and experience we wish to bring here in Zambia to maximise our benefit from the emerging LNG sector in neighbouring countries. At Stanbic Bank, we are ready to work with all stakeholders to explore how Zambia can best take advantage of the opportunity in Mozambique and improve our own economy,” he concluded.

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