Proactive co-operation in MozambiqueApril 27, 2020
Simone Santi, president of Leonardo Group, talks to The Energy Year about the private sector’s role in helping Mozambique weather the storm of Covid-19 and how the crisis is impacting ongoing projects in the country’s oil and gas industry. Leonardo Group provides services in the oil and gas, legal, tourism, real estate and agribusiness industries.
What role can the private sector play in easing the impact of Covid-19 on Mozambique’s economy?
As a private sector player, it is our responsibility to help limit the impact of Covid-19 and its consequences for the country’s economy and population, but also to keep investing in our companies and be flexible. We expect that some of the key decisions concerning oil and gas investments may be further postponed. It is hard to make predictions as to how the development of the country’s mega-projects will evolve in the coming months.
We are a very diversified group. Our logistics and tourism departments have been heavily affected by the coronavirus pandemic. Therefore, we have decided to redirect our focus into developing small-scale renewable projects and improving our domestic manufacturing capabilities to help with the production of masks. Shortages of these items will continue to be an extreme concern during the pandemic.
We are also offering pre-paid phone cards to local households so they can stay connected to their loved ones, work and school while being stuck at home during the crisis. Moreover, we have other fundraising initiatives in place to support local Mozambican families, including offering pre-paid cards to buy food at the local Cash & Carry.
When you do business in Africa, you have to take an active role in the community. Corporate social responsibility is more valid now than ever before. We are delivering basic supplies such as tomato sauce and stove gas for cooking to local households in the country. We have to hope that this will only be a temporary crisis.
How has Covid-19 affected the labour pool available for the country’s ongoing offshore oil and gas and EPC projects?
Certain projects such as the continuation of the development of high-quality resources in Area 4 have already been delayed. We know that the associated drilling campaign will be pushed back too. However, I am confident the Coral floating LNG project will remain on time and schedule with 70% of the FLNG unit’s construction having already been completed in South Korea.
We are also very optimistic about the Total project, which includes the development of offshore gasfields in Mozambique’s Area 1 and a two-unit liquefaction plant. Some early works may be delayed, but in terms of general timing the project in Area 1 should follow schedule.
Saipem and McDermott are leading the EPC contract for Area 1, which will benefit from the industry-leading experience of these companies. The scheduled timing is being respected by engineering and procurement, although it is possible though that dredging, with which we are involved as MPower, will probably be somewhat delayed – at the moment only two weeks. Our local procurement department is working hard to find the best solutions in the country.
All industry stakeholders must be open to the idea of flexibility. However, the continuation of one big mega-project, such as Area 1, can create a lot of optimism for a country such as Mozambique.
How viable are small-scale renewable energy projects in the current environment?
Our group company Leonardo Green has started construction on a micro-project in renewables in the north of Mozambique using biomass for cooking, and we are working to secure another project for a 30-MW solar plant in the south of the country. We also have a plan with a partner for a 70-MW project in Cabo Delgado, and we will continue to push to obtain authorisations to execute similar small-scale renewable projects. In the current energy crisis, small-scale renewable projects, especially mini-grid hydropower plants, will be essential for enhancing rural electrification.
A year and a half ago we started to do an incubation programme with young IT entrepreneurs, and today we have a fit-for-purpose digital network infrastructure in place to support our activities and expansion plans into the renewable scene. We are proudly involved in supporting the Ministry of Health in finding technical solutions and applications for the Covid-19 crisis. Digital transformation will help Mozambique’s economy and energy industry to move forward.
How can local companies grab a larger market share in the country’s mega-projects during Covid-19?
For certain types of activities, international players will always be the preferred choice. In terms of construction and civil works, as well as basic logistic services, local players can indeed bring a lot to the table.
This is the time for local companies to get more market share and prepare for the opportunities that will emerge out of this crisis. We have to start thinking about the next step after coronavirus. This is a good time to get prepared for what comes next and seek additional efficiencies.
For oil and gas and energy, some companies will be heavily affected, especially those involved with gasoline distribution due to the restrictions on transport and equipment movement. But there are also opportunities for companies to flourish in areas that will be of great demand in the post-crisis environment, such as inspection, monitoring and asset management.
As president of the oil and gas, energy, and mineral recourses sector of the CTA [Mozambican Business Council], I can say that we are working with the ministry, the INP [National Petroleum Institute] and main investors to have the best business environment and flexibility that the Covid-19 period requires at this moment. Over the last 10 years, the oil and gas industry became more similar to the other industries and can be a booster for sectors such as tourism (including conferences, meetings and events), agriculture and agroindustry (catering, ship handlers, food, fertiliser, etc.), and general services.
What role can public-private sector dialogue play in coping with Covid-19 and its aftermath?
The government and private sector will have to be working hand-in-hand to tackle the challenges over the next five to six months. My peers are doing their very best to protect their workers, and the country’s entrepreneurs are on the same page in terms of ensuring the safety of their employees so that operations can continue uninterrupted.
As president of EuroCam [an association of European chambers of commerce in Mozambique], we are also in discussions with the Ministry of Industry and Commerce in order to study the best support for the private sector, taking into consideration the European experience with Covid-19.
Public-private dialogues must also focus on incentives for companies that are involved in strategic sectors, such as tourism and manufacturing. Moreover, we need to protect the country’s currency. Those who export locally made products (although the import substitution process cannot stop) and those who participate in local energy mega-projects have to be protected by the government.
Mozambique’s history has witnessed some dramatic ups and downs and most Mozambicans are used to surviving a crisis. A high proportion of the country’s population lives in rural areas. We know that some of them will be hit hard by the current crisis and we must help them cope with the hardships stemming from the pandemic.
The culture of the country is to take decisions based on a large consensus. Mozambique has good relations with external investors and international organisations that we can count on to help the nation’s development going forward. Our goal should remain to become the world’s next LNG superpower and compete with the likes of Qatar, but without becoming a “one-sector-based economy” that depends only on oil and gas or imports.