SOUTH Africa is pivoting to a more gas-reliant energy mix. The Minister of Energy and Electricity, Kgosientso Ramokgopa calls it the country’s gas-fed industrialisation and the exploration of the well-worn path to lower carbon energy that the global north has already taken by scaling gas to power. The Draft Integrated Resource Plan 2023 includes a total of 7,220 MW of new energy to be generated by Gas-to-Power (GtP) plants developed by Eskom and Independent Power Producers (IPPs) by 2030.
This increase in demand comes at a time when the country’s supply of natural gas is teetering on the edge of a cliff. The ‘gas cliff’ refers to the sharp decline in gas supply from Mozambique’s Pande and Temane fields as they are depleted. The Industrial Gas Users Association – South Africa (IGUA-SA) has warned that the anticipated decline threatens to disrupt the supply of natural gas to South Africa, impacting industries that rely heavily on this energy source. “The consequences of a sudden supply shortfall are profound, ranging from increased energy costs to potential job losses and economic instability,” it warned.
Sasol has notified customers that its supply from these fields will be cut off in June 2027.
Quite apart from planned GtP plants’ new demand for gas, existing industrial gas users have less than three years to secure an alternative source of supply.
Supply alternatives
Jaco Human, executive officer at IGUA-SA says domestic gas would be the best option. “Domestic gas is always preferable to imported Liquefied Natural Gas (LNG) by virtue of its price. But South Africa doesn’t have access to natural gas. It has the resources, but we’re now compelled to import LNG for the next decade or two. The reality is it’s going to impact the manufacturing sector because imported LNG is a pricey option,” he says.
According to Human, the sourcing of gas is the least of users’ worries. “Gas in the form of LNG is widely accessible on global markets, provided that you are a credible counterparty.”
The IGUA-SA is in the process of creating an aggregator company, GasCo, which it will use to secure the supply of gas for its members on a cost-pass through basis. Human says the Association was almost compelled to go ahead with this programme given the current market structures and the impending ‘gas cliff’. It’s full steam ahead in the absence of anything else which is clear and discernible. Not a single company has stepped forward to say I’ve got an all-round solution for you.”
The molecules are not the problem, it’s the infrastructure, he explains. “An aggregator has an equally important role to play in that it must be able to bank these significant infrastructure investments. These are typically Floating Storage Regassification Units (FSRUs), or Floating Storage Units (FSUs) as well as pipeline interconnections into the networks. Infrastructure is partly where South Africa is lagging at this point in time.”
He says these projects take at least eight years to develop. “There are significant requirements in terms of approvals and funding before construction even starts.”
KwaZulu-Natal
Looking at KwaZulu-Natal’s regional demand for gas, at least 3,000 MW of GtP has been granted to Eskom in the uMhlathuze region where Richards Bay is situated. This project is being fast-tracked by Eskom and aims to source LNG through the Richards Bay Port.
In the IGUA-SA annual report 2024/5, it says its members in KwaZulu-Natal, which include sugar and paper and pulp producers, represent a gas demand of 11 PJ/a. The Association suggests that the investment in LNG infrastructure at Richards Bay will be contingent on a feasible business case for volume throughput of gas of at least 75-100 PJ/a.
The construction of the Richards Bay LNG terminal is thus dependent on GtP developments by Eskom and private developers post-2030, the Association’s report says.
Although a Terminal operator Agreement (TOA) is yet to be concluded with the developers, Transnet National Ports Authority (TNPA) has more optimistic timelines, projecting that the Richards Bay LNG terminal will be operational by Q1 2028, at final investment decision (FID) in Q1 2026 and Front-End Engineering Design (FEED) will be completed by Q1 2025.
At Richards Bay, TNPA has appointed a joint venture between Vopak SA and Transnet Pipelines (TPL) to develop and operate what is being called the Zululand Energy Terminal (ZET). TNPA says Phase 1 of the ZET is aiming for completion in 2028 and includes a 170,000 m3 FSU and an onshore regasification facility with a capacity of 2 million tons per annum (mtpa) of LNG.
TNPA says Phase 2 could be completed as early as 2032-35 and will include an LNG tank with a 220,000 m3 capacity, potentially replacing the FSU and an increased regasification capacity of 5 mtpa. Phase 3 will include further tank storage.
TNPA is also developing LNG import terminals at Ngqura in the Eastern Cape and Saldanha Bay in the Western Cape.
Pipeline infrastructure
Two existing pipelines can be used to transport Regassified LNG (RLNG) from the new LNG import terminals – the ZET at Richards Bay and the LNG terminal at Matola, Mozambique.
The Rompco pipeline, which IGUA-SA regards as its path of least resistance, is an 865km pipeline connecting the depleting Pande and Temane gas fields in Mozambique to Secunda.
This pipeline could potentially be used to transport RLNG from the Port of Matola in Mozambique to Gauteng, and then on to KwaZulu-Natal via the Lilly pipeline. The Rompco pipeline is only 80 km away from the new terminal in Maputo.
The Lilly gas pipeline, owned by TPL, connects Secunda via Empangeni to Durban, with key offtake points along the route, transporting Methane Rich Gas (MRG). TPL aims to upgrade the Lilly pipeline to transport RLNG in the reverse direction and add a new intake station at Empangeni, among other adaptations.
TPL is currently reviewing responses to an Expression of Interest (EOI) for this project and the state-own enterprise says it anticipates Heads of Agreement or Term Sheets to be with potential customers by 30 June 2025.
TPL says the ZET will connect to the Lilly pipeline to establish a complete LNG value chain. “This setup will leverage both the port and the pipeline to supply downstream customers with their energy needs,” according to TPL.
With its eye on the ‘gas cliff’, the IGUA-SA says to mitigate gas energy supply risk and provide future gas supply optionality, it is critically important to link the Rompco and Lilly pipelines by 2025.
The IGUA-SA says the Matola LNG import terminal, being developed by TotalEnergies, in consortium with regional partners Gigajoule, is looking to reach a final investment decision (FID) in 2024 with an implementation date in 2027 on the back of committed demand.
Human says, working the timelines backwards, long-term agreements will need to be secured in May/June next year to deliver natural gas to industrial users in South Africa by June 2027/8.
Edited: 4/11/2024
