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

Grupo Videre Representative (GVR): The COVID-19 pandemic has had a significant impact on our oil and gas investments. Due to market conditions and uncertainties caused by the outbreak, we had to put some of our projects on hold. One of our key plans for COGS (Consolidated Oil and Gas Services), our Mozambican oil services company, was to make downstream investments and establish a strategic partnership for the management of LPG terminals, along with an aggressive distribution plan. However, we had to reevaluate our business plan in July 2020 and return to the negotiation table to accommodate the changing circumstances.

The severe impact of COVID-19 on Sasol’s investments in the US has also affected their global balance sheets. As they are currently selling strategic assets, we are closely monitoring these developments.

Regarding the LNG projects in Area 1 and Area 4, we were actively engaged in negotiations and partnerships before the lockdown in March. However, the pandemic caused disruptions. Area 4, which involves Exxon as the main operator, faced challenges as many expatriate employees had to return to their home countries. Earthworks for Area 4 were expected to commence in April 2020, and service contracts with the main EPC contractor, Fluor, were being negotiated. Unfortunately, COVID-19 caused delays, and it now appears that the project may restart in early 2021 or possibly be further delayed until 2022. We are anticipating a final investment decision (FID) to be made in late 2021.

As for Area 1, one of the first areas affected by the outbreak in Mozambique was the Afungi peninsula in Cabo Delgado, where Total temporarily closed its operations. However, work never completely halted in Area 1. In fact, multiple Solenta planes were chartered in July to transport Total workers between Maputo, Pemba, and the project site. Despite the state of emergency and increased terrorism in the region, work has continued. However, service providers are now facing challenges as renegotiations for pricing and margins have become more prevalent.

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

The crisis began even before COVID-19 spread widely, and the Russia-Saudi price war in March directly impacted Area 4, causing a crash in oil prices. As the price of gas is linked to the daily oil price, it inevitably influences decision-making and timelines for international oil companies (IOCs). However, considering the magnitude of the investments involved, the major players remain committed to the projects. In May, Total reaffirmed its commitment to LNG development in Mozambique, emphasizing that they would 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?

Yes, we have observed tangible action supporting the development of local content, at least in the preliminary stages. In Area 1, for example, all the aggregate materials are being sourced from Mozambique, and local companies are involved in providing logistics services. Additionally, approximately 90% of the preliminary employment, such as drivers and security personnel, is sourced locally. As for Area 4, we were expecting Exxon and Fluor to present their local content plan by late 2019 or February 2020, but it has not materialized as of July 2020. However, there are rumors that they will allocate around US$2 billion to local companies, focusing on employment, services, and corporate social responsibility programs.

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

In the next twelve months, Grupo Videre will concentrate on various areas within the oil and gas sector. We are currently negotiating the LPG terminals at the ports of Maputo and Beira. Additionally, our main partner in COGS, in collaboration with Exxon Mobil South Africa, has been shortlisted in the services tender for Sasol’s Mozambique-South Africa pipeline. This pipeline, spanning 865 km, is crucial for transporting gas from the Pande and Temane fields in Mozambique to Sasol’s industrial customers in South Africa.

We are also actively involved in the CTGR project, a 400 megawatt power station in partnership with Sasol and EDM. We are searching for a strategic partner for this project, which holds significant importance for our operations.

Furthermore, Grupo Videre engages in human logistics, and we have recently secured a proposal to provide strategic lounges, meet & assist services for passengers arriving in Pemba from Maputo, and immigration assistance for international passengers arriving in Maputo, Pemba, and Afungi. We are finalizing details with Amelia Regourd, an aviation group, to facilitate transportation, customs, and visa services for oil and gas workers traveling from Europe to Mozambique.

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