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In the pipeline: SA’s new natural gas import terminal

2019-07-25 17:26

State-owned freight logistics firm Transnet plans to launch a tender next year for South Africa’s first terminal to import liquefied natural gas at Richards Bay port, with the first gas expected to land in 2024, a senior official said on Thursday.

South Africa is pushing to diversify its energy sources away from coal, which supplies more than 90% of its electricity, and to expand capacity to reduce power cuts that have hit growth.

Transnet, which operates gas pipelines, railway lines and ports in South Africa, will lead the project after the World Bank’s International Finance Corp pledged $2 million (about R28 million) to help finalise the design, finance, construction and operation plans.

The project requires re-purposing existing pipelines to transport gas between the east coast city of Durban and commercial hub Johannesburg.

“We are hoping second quarter or third quarter 2020 for the request for quotations,” which is part of the tender process, said Jabulani Sithole, a Transnet oil and gas business manager.

“Based on the work we have done we believe that we are able to land the gas in South Africa by 2024,” Sithole told Reuters.

He said it was vital to secure new gas supplies as Sasol, which pipes the bulk of South Africa’s gas needs from Mozambique, had flagged it would face supply constraints from 2023 due to maturing fields at Temane and Pande.

A Sasol spokesperson confirmed the supply deficit scenario.

A pre-feasibility study would determine costs of the terminal project, Sithole said, adding that Transnet would seek to attract natural gas suppliers such as Shell and BP.

“The final cost of the gas will be determined in the negotiations between the gas supplier and off-takers,” said Sithole, adding that a special purpose vehicle would be formed to help fund the project through debt and equity financing.

Transnet aims to use its existing gas pipelines and rail infrastructure to lower local transport and distribution costs.

Angola and Mozambique, where US energy firm Anadarko Petroleum Corp last month approved Africa’s biggest natural gas project worth $20 billion, were potential suppliers, Sithole said.

Sithole said the regasification terminal could be on land or a Floating Storage Regasification Unit serving Richards Bay and other ports, including Coega where plans for a gas-fired power plant were being considered.

“We are looking at all options,” he said.

France’s Total said in February it had found about 1 billion barrels of hydrocarbon resources, including a significant gas condensate resource, off South Africa’s east coast.

With the average age of Eskom’s coal-fired power stations at 37 years, closures of the oldest ones, such as Hendrina, Grootvlei and Komati, are already on the cards.

According to the draft integrated resource plan, circulated in August last year, 12 gigawatts of coal-fired power would be decommissioned by 2030 and 35GW by 2050.

This would reduce South Africa’s reliance on coal for energy production to 20% by 2050. – Reuters

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November 10 2019