May 30, 2016 / 2:41 PM / 3 years ago

UPDATE 1-Sasol says Mozambique gas project unaffected by debt crisis

* Debt crisis, oil price fall won’t hit investment

* First new gas production due mid-2019

* Mozambique to pay out of gas revenues (Adds detail, quotes)

By Zandi Shabalala

TEMANE, Mozambique, May 30 (Reuters) - Mozambique’s debt crisis and lower oil prices will not affect Sasol’s $1.4 billion gas project because costs will be covered by the South African energy company and recouped through gas revenues, the company said on Monday.

Mozambique missed a loan repayment deadline this month, plunging one of the world’s poorest countries into a debt crisis.

Slowing growth and delays to the start of offshore gas production have added to Mozambique’s cashflow problems with ratings agency Fitch downgrading the war-scarred southern African nation’s credit rating last week, warning that a default was likely.

Despite the country’s cash-crunch, Sasol will continue with oil and gas developments because the Mozambican government’s financial obligation will come from the proceeds of gas sales.

“I don’t see any impact on us due to the debt crisis,” John Sichinga, head of exploration and production told Reuters.

“We are in Mozambique for the long haul. We will ride the waves, the downturns and the upturns.”

Sasol owns 70 percent of the project, the Mozambican government holds 25 percent through its national company CMH and the International Finance Corporation owns 5 percent.

Mozambique is sitting on huge gas reserves and developing liquefied natural gas export projects is expected to bring tens of billions of dollars to the impoverished state.

Sasol’s project, which lies about 600 km (372 miles) north of the capital Maputo, will be rolled out in stages. The first phase will include an oil, liquefied petroleum gas and gas project adjacent to its Pande and Temane fields.

Natural gas from these two fields is currently being transported through a 865 km pipeline to gas markets in Mozambique and South Africa.

Sasol drilled the first of 12 planned wells in its new oil and gas field in Mozambique last week with first production expected in mid-2019.

Most of the gas will go to a 400-megawatt power plant in Maputo with the rest destined for third-party customers.

The company began producing gas in Mozambique in 2004, supplying mainly its two South African power plants. (Editing by Joe Brock and Susan Fenton)

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