Box 3. Contractual Agreements of the Joint Venture

The Regulatory Agreement was signed in September 2001 between Government of South Africa and Sasol to protect the company against uncertainties, provided that Sasol ensures a minimum gas supply to South Africa. The agreement provides Sasol with dispensations and guarantees. Sasol obtained exclusive use of the pipeline for ten years and benefits from the application of market prices to customers, together with an exclusive license for natural gas distribution in South Africa. Also, no renegotiation of the agreement or changes in gas tariffs and expropriations will be undertaken in these ten years.

The Petroleum Production Agreement and the Pipeline Agreement, signed on 26 October 2000, defines the framework, rights and obligations of each party engaged in the project to enable gas exploration, production and distribution. Accordingly, Sasol holds a concession to use gas resources in Temane and Pande, against a royalty of 5% of the shipped gas, to be paid either in cash or in kind to the Government of Mozambique. The 5% royalty is calculated on an amount of gas up to 120 MGJ/year. In a subsequent phase, given the increased availability of 27 MGJs/year, the parties agreed on an additional concession, to which a 6% royalty applies. In addition, the agreement foresees 8% royalty on crude oil sales from condensate from the CPF in Temane.

The commercial agreements are the Gas Sales Agreement (GSA) and the Gas Transportation Agreement (GTA). The GSA regulates the commercial relationship between the Seller (SPT) and the Buyer (Sasol Gas). The supply period is set at 25 years. The GSA secures a revenue stream for the Seller through a “take-or-pay” obligation of the Buyer. Similarly, the GTA secures a revenue stream for ROMPCO through an appropriate “ship-or-pay” obligation of the Shipper (Sasol Gas). The GTA period is also set at 25 years. The transmission tariff is calculated as a base tariff, increased quarterly by an agreed South African inflation index and is paid in Rand.