"During the state of emergency which started in April, there has been a huge increase in terrorism in the Northern region, but even with this, work has continued. The issue for many services providers now is that everybody seems to be coming back to the table for repricing and hopes for a good margin are getting lost."

Chivambo Mamadhusen


September 09, 2020

How have Grupo Videre’s activities in the oil and gas industry been impacted by COVID-19?

Due to the coronavirus outbreak and the impact it had on the market Grupo Videre had to put some of its oil and gas investments on hold. One of the big plans for COGS (Consolidated Oil and Gas Services), our Mozambican oil services company, was a downstream investment to close a strategic partnership for the management of all the LPG terminals and an aggressive distribution plan. Fortunately, in July 2020, we headed back to the negotiation table and we are restructuring our business plan accordingly.

Sasol was hit severely on their US investments, which impacted their global balance sheets, they are currently selling strategic assets and we are paying attention to that.

In regards to the LNG plant we are currently in several tenders and we expect some decisions to happen in the last quarter of the year.

To what extent were the Area 1 and Area 4 LNG projects interrupted, and how has it impacted service providers?

Before the lockdown in March, we were running 10 hours a day to close partnerships for Area 1 with Total as the main operator, and Area 4 with Exxon as the main operator. On the Exxon side, the majority of their expat employees returned to their home country. In April 2020 earthworks on Area 4 was expected to start, and we were negotiating service contracts with the main EPC contractor, Fluor. Obviously, delays were incurred due to the coronavirus, but it looks like they are expected to re-start early 2021 and may be delayed until 2022. We are now expecting an FID in late 2021.

With regards to Area 1, one of the first points of contagion in Mozambique was actually the Afungi peninsula in Cabo Delgado, which caused Total to temporarily close down its operations in this region. However, work never really stopped at Area 1, and in July there have been multiple charted Solenta planes taking Total workers from Maputo to Pemba and Pemba to site. During the state of emergency which started in April, there has been a huge increase in terrorism in the Northern region, but even with this, work has continued. The issue for many services providers now is that everybody seems to be coming back to the table for repricing and hopes for a good margin are getting lost.

Do you think IOCs are delaying projects because their forecasts were predicated on higher commodity prices?

The crisis started before COVID-19 became widespread. Area 4 was directly impacted by the Russia/Saudi price war that caused oil to crash at the beginning of March. As the price of gas is directly linked to the oil price of the day, it is bound to influence decision making and timelines from the IOCs. However, considering the scale of investment, the main players remain committed. In May, Total reaffirmed its commitment to LNG development in Mozambique, stating that they will not miss deadlines.

There has been a lot of rhetoric regarding the development of local content in Mozambique. Have you seen this rhetoric backed up with tangible action?

I would say yes, at least for the preliminary works so far the IOCs have been taking local content into account. For Area 1, all the aggregate has been awarded and is coming from Mozambique, a lot of the logistics will be provided by local companies, and at least 90% of the preliminary employment (such as drivers and security) is Mozambican. For Area 4 we were expecting to see the local content plan from Exxon and Fluor in late 2019, and then February 2020, but it has not materialized until now (July 2020). There are rumors they will dedicate around US$2 billion to local companies, and they will focus on employment, services and CSR programs.

What are Grupo Videre’s areas of focus in the oil and gas sector for the next twelve months?

In addition to the negotiations of the LPG terminals at the Maputo and Beira ports, our main partner in COGS, in partnership with Exxon Mobil South Africa, just got shortlisted in the services tender for Sasol’s Mozambique-South Africa pipeline. Sasol’s 865 km gas pipeline was built to transport gas from the Pande and Temane fields in Mozambique to Sasol's industrial customers in South Africa, and is a key focus for the company. We have also seen the CTGR project, a 400 megawatt Sasol and EDM power station, in the market for a strategic partner.

Grupo Videre also works with human logistics, and recently closed a proposal for Total to provide strategic lounges and meet & assist services for passengers arriving in Pemba from Maputo, and immigration assistance for international passengers arriving in Maputo, Pemba and Afungi. Furthermore, we are finalizing details with an aviation group called Amelia Regourd to arrange transport, customs and visa services for oil and gas workers coming from Europe to Mozambique.


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