The International Finance Corporation (IFC) formally announced an $18,5-million equity investment in a joint venture with petrochemical giants Sasol and ENHto develop natural gas resources in the country’s Inhambane Province.

Led by sponsor and operator Sasol of South Africa, the project will develop two natural gas fields, a central processing facility, and a 900-km pipeline linking the fields in Mozambique to Secunda, South Africa.

It also includes the conversion of the Sasol gas distribution network and the shift from coal fuel to gas as a feedstock for chemical plants.

IFC will take a 5% stake in the upstream portion of the project, the development of the gas fields and the central processing facility.

Sasol will hold 70%, and CMH, a subsidiary of ENH, will hold 25%.

The World Bank and Miga also participated in the project by providing guarantees to private investors for both the upstream and the pipeline portions.

Rashad Kaldany, director of the World Bank Group’s oil, gas, mining, and chemicals Department said, “to enable Mozambique to reap both economic and social benefits, the project will promote local participation and ensure the presence of Mozambican investors in the transaction”.

ENH chairperson Issufo Abdulla added, “what is unique about this project is that IFC’s participation ensures that Mozambicans will have an ownership stake in it”.

The construction and development of this project are generating economic activity where the gas fields and pipeline route are located.

The project employs local companies and people, with roughly 15% of the upstream costs set to go to Mozambican firms.

A $5-million social fund has been established for a variety of community-based initiatives, including water boreholes, clinics, schools, and agricultural activities.

In addition, about $3-million will be made available to support capacity building, training, and institutional development activities for ENH and the Mozambican government over the next 15 years.

The IFC said that gas transportation infrastructure built around the project is likely to attract additional investments in gas exploration, industrial and commercial gas applications, and small scale gas-to-electricity schemes and the project will also eventually support the substitution of natural gas - a cleaner form of energy - for imported petroleum products and coal.

IFC is also looking at using carbon credits to help develop the local gas market in the south of the country.