Opportunities in the South African Natural Gas Market, 2015
South Africa’s energy mix is dominated by coal, complemented by renewable and nuclear energy. The government of South Africa has set targets according to the IRP 2010, which forecasts an energy mix containing a greater contribution from renewable energy such as wind, solar, and hydro. This mix also contains a substantial contribution from gas. The Gas-to-Power programme in South Africa, parallel to the REIPPPP, has been met with delays in recent years. The programme, which is set to procure 3,126MW, is waiting for an instrumental policy document, the Gas Utilisation Master Plan (GUMP), which will determine the role gas plays in South Africa’s energy mix. The document outlines the country’s plans to integrate gas into the energy mix through public-private partnerships.
While the GUMP may be delayed, the Gas-to-Power programme is slowly making gains. Two carefully selected ports have been earmarked to receive gas via a floating storage regasification unit (FSRU). This prevents the risk of stranded assets, should the program be abandoned. The 2 ports were strategically selected due to centrality and demand. Key to the viability and development of the port is an anchor client that would off-take the majority of landed gas. Ports to see this development will be Eastern Cape (Coega: 1000 MW) and KwaZulu-Natal (Richards Bay: 2000 MW), while the Western Cape will no longer see any LNG activity; the Western Cape will continue with LPG production. The excess gas that is imported would be available for use in industries such as automotive, as well as commercial buildings and residential homes. This potential demand for industrial use has been estimated at 37.8 million gigajoules. This value is for industries that make use of other fuels and would be willing to convert their operations to natural gas. Those industries that already make use of natural gas receive their gas Mozambique imports via Sasol, which has the monopoly. Sasol was named the primary gas supplier and distributor for certain identified distribution areas by the Gas Act (2001) until 2014. Despite more than 10 years of this, Sasol remains the sole importer of natural gas into South Africa. The gas is imported from the Temane and Pandae gas fields in Mozambique via the 865 km ROMPCO pipeline.
Risks to the gas economy come from other natural gas sources. The Gas-to-Power program relies on the development of gas infrastructure in the afore-mentioned ports. These ports will bring in imported gas. However, potential shale gas deposits in the Karoo will threaten the need for any port infrastructure. Further risks to the gas economy stem from lack of policy, government apathy, and credit downgrades recently announced.
Nonetheless, the demand for natural gas is immense and will see returns, should the hurdles be addressed.
Key questions this study will answer include:
• What is the state of the energy sector in South Africa?
• What are the developments in the gas economy?
• What is the potential for new markets in the natural gas economy?
• Who are key participants in the gas value chain?
• What are the views of the residential, commercial, and industrial sectors?
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