Oil and gas explorer SacOil Holdings has teamed up with the South African and Mozambican governments to study a possible $6 billion gas pipeline between the two countries, it said on Monday.
If viable, the pipeline and the distribution facility will carry natural gas from Mozambique into South Africa, as well as other southern African countries.
South Africa, whose coal-fired power plants are not environmentally friendly, is the nearest big outlet for Mozambique's vast natural gas reserves.
A former Portuguese colony located on southern Africa's Indian Ocean coast, Mozambique is one of the world's least-developed nations but is starting to tap huge coal and natural gas deposits with foreign investors.
"The indicative gas requirements of, as well as benefits to, Mozambique and South Africa appear to justify such a pipeline," SacOil said in a statement.
SacOil, Mozambique's state owned firm IGEPE and South African government-owned pension fund Public Investment Corporation would fund the project.