SA set for gas boom as consumers look to cut reliance on Eskom

Power lines feed electricity to the national grid from Koeberg Nuclear Power Station.
Power lines feed electricity to the national grid from Koeberg Nuclear Power Station.

As mass consumers of electricity look to cut ties with Eskom, gas sector may become a big power player

The local gas industry could be in for some significant growth as major industrial power consumers look to cut their reliance on Eskom and avoid increasing electricity tariffs.

At the same time, there is sizeable potential in the gas sector driven by the stipulations contained in the draft Integrated Resource Plan (IRP).

This emerged at the Energy Week conference held in Cape Town last week.

With the exception of the 865km pipeline that carries 200 million gigajoules of gas from Mozambique to South Africa, the natural gas industry is virtually nonexistent and otherwise confined to small-scale imports by industrial users.

The gas imported by Sasol is distributed to customers in Gauteng, the Free State, KwaZulu-Natal and Mpumalanga, and Sasol uses a portion of the gas for its own operations.

However, the increase needed to meet the requirements contained in the draft IRP indicates that a new gas industry would have the potential to mirror the development of the renewable energy industry over the past seven years.

When the first Renewable Energy Independent Power Producer Programme bid window opened in 2011, the industry was almost nonexistent.

Seven years later, it has seen more than R200 billion worth of investment, creating close to 30 000 jobs and generating more than 6 000MW of electricity.

Natural gas is expected to contribute 8 100MW (or 16% of the energy mix) of power generation by 2030, according to the draft IRP.

With an estimated 8 million cubic metres of gas a day needed to run a 2 000MW gas power plant, South Africa will need to procure in the region of 32 million cubic metres a day if it is to meet the energy mix requirements contained in the draft IRP.

An environmental impact assessment for an Eskom-run 3 000MW closed cycle turbine plant within the Richards Bay Industrial Development Zone (IDZ) is being conducted, with 2 000MW apportioned to Richards Bay and 1 000MW to the Coega IDZ in Port Elizabeth.

Eskom’s general manager for grid planning, Mbulelo Kibido, said the mixture of gas and renewable energy was needed for flexibility as power from gas could be quickly and easily brought online when renewable energy sources were not available.

However, for power from gas to be absorbed into the grid, the transmission lines needed to be strengthened, said Kibido.

As a result, the transmission lines to Richards Bay and Coega are being reinforced in anticipation of the future gas-powered plants.

As to where the gas will come from, eyes are on Mozambique with its vast offshore reserves.

It is estimated to hold 180 trillion cubic feet of gas in the Rovuma River basin to the north, with more reserves offshore in the central parts of the country.

Department of energy director-general Thabane Zulu said that Mozambique was a strategic partner, and country-to-country engagements had already started.

Extracting shale gas from the Karoo, which has seen strong opposition from environmental groups, and offshore exploration off South Africa’s west coast and KwaZulu-Natal were other possibilities.

But with the IRP putting gas in the energy mix from 2026, the window for developing the needed infrastructure, financing and agreements would not be open for long if the requirement was to be delivered on time, said a number of experts and analysts at the conference.

This was because building the infrastructure would take at least five to six years.

Percy Langa, a Richards Bay Industrial Development Zone Company manager, said it was undertaking a gas and oil study to understand the whole gas value chain.

He said they were determining what infrastructure would be needed to make gas available, and the IDZ had also been engaging with Transnet, which could bring gas into the interior by rail.

Nomfundo Maseti, a regulator member for piped gas and electricity at the National Energy Regulator of SA, said a concrete commitment was needed from government.

“We need to see implementation, not just allocations,” said Maseti, adding that a gas road map was needed to facilitate investment through regulatory certainty.

However, she said she believed coordinated Southern African Development Community discussions on a gas master plan had already started and there were existing arrangements between Mozambique and South Africa.

“The strengthening of bilateral agreements is important,” she said.

Cornerstone Infrastructure Advisors CEO De Buys Scott said: “This is a dynamic new industry we’re launching.”

A similar process of starting a new industry almost from scratch occurred with renewable energy and the diligence of that process should be replicated, said Scott.

He said the current thinking was focused on bundling, in which procurement from beginning to end was bundled together within consortiums.

This reduced pricing conflicts and made funding easier as the entire process was controlled, but it did tend to exclude smaller players.

But, he said, as with the renewable energy process, the structures would evolve.

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