October 3, 2007

Government approves oil refinery project, plans for Biofuel production

The Mozambican government has approved a project to build and operate on oil refinery in the district of Nacala-a-Velha, on the coast of the northern province of Nampula. The refinery, known as the Ayr Petro-Nacala project, will cost about five billion US dollars, while the initial capital is 50 million dollars. The largest investor, with about 70 per cent, is Ayr Logistics, a company registered in the US state of Texas which describes itself as providing "a broad spectrum of logistics support throughout the world". The other investors are a South African citizen, Colin Crorie, and the Mozambicans Luis Ferreira Mendes and Hercilio Varela de Almeida, who set up a Mozambique-registered branch of Ayr (Ayr Logistica Limitada) in November 2006. The refinery, covering an area of 838 hectares, will be able to produce over 300.000 barrels of fuel a day, and will employ 450 Mozambican workers. According to the government spokesperson, Deputy Education Minister Luis Covane, two-thirds of the fuel from the refinery would be exported, since the Mozambican economy could not consume anywhere near the amount that would be produced. Even 100.000 barrels a day "is greater than Mozambique's needs", he noted.
Construction of the refinery will begin in the first half of 2008, accompanied by a training programme that will involve 150 foreign technical staff. "This is a major project that will accelerate the development of that part of the country and of all of Mozambique", Covane told reporters. The crude oil for the refinery can be unloaded at Nacala port. The refinery could cut the costs of the fuels that Mozambique currently has to import, and will also be able to supply Mozambique's neighbours (notably Malawi and Zambia) at prices cheaper than those they are currently paying.
In the meantime, Fernando Songane, the director of the National Agricultural Development Programme (PROAGRI), announced that the Ministry was working on a strategic plan that included biofuels. "We have to organise to respond to this demand because that's the current nature of the market we find ourselves in", he declared. "It is part of the core functions of the Ministry, in that we must have the capacity to respond to new demands". Songane said the Ministry was fully aware of the need to find a means of co-existence between food production and the production of biofuels. But in essence the problem was no different from that posed by other cash crops - Songane noted that the production of cotton by peasant farmers in Nampula, or of sugar cane by peasants in Xinavane in Maputo province, did not mean that these farmers stopped growing food.
"We must be prepared to capitalise on the capacity of our small producers", he said. "More than 90 per cent of food production is in the hands of small producers. Based on experiences such as sugar cane in Xinavane, we have to see how the small producers can be involved (in biofuels), because they have to produce wealth for our economic independence". But Songane warned that people must not be forced off their land to make way for biofuels. "We must not allow the usurpation of peasant land for biofuels", he declared.
He guaranteed that the Ministry would not allow any expropriation of peasant fields or pastures by those who want to grow biofuels. But some biofuel projects could have a damaging effect on food production because of their use of water. This is the main problem with a project called PROCANA in the Limpopo valley. Drawing on water from the Massingir dam on the Elephants river, the main tributary of the Limpopo, this project aims to irrigate 30,000 hectares of sugar cane to produce ethanol. This could lead to less water reaching farmers growing maize, rice and vegetables on the lower reaches of the Limpopo, who had assumed that they would be the ones to benefit from the recent rehabilitation of the dam. (Agencia de Informacao de Mocambique, Maputo)

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