Speaking at the Wits Business School Gas Symposium last month, industry body Onshore Petroleum Association of South Africa chairperson Nick Mitchell argued that although South Africa is “in the midst of a gas cliff”, demand cannot be met purely by indigenous gas.

“We do not have the time, and we will not have the [authorised or permitted] development and construction activities completed to mitigate the gas cliff [. . .] we will need the likes of the Zululand Terminal, Matola Project and West Coast Gas to come on board.”

According to Mitchell, South Africa needs to be practical, with its upstream oil and gas sector collectively working towards solutions that not only result in phased developments but also support the entire industry, enabling the sector to mitigate the impacts of a gas cliff that could “potentially cripple the country”.

The gas value chain requires significant coordination, said industry organisation Industrial Gas Users Association – South Africa (IGUA-SA) executive officer Jaco Human during the symposium.

“We do not have a gas problem; we have a management problem in South Africa. Strategic foundational policies are required,” he stated.

The IGUA-SA is lobbying for a centralised State-owned gas utility, similar to State-owned power utility Eskom, to evaluate the strategic national development of gas-related infrastructure among the various players in the broader gas value chain.

The association believes that South Africa must align national, and specifically industrial demand, with infrastructure development, and should create policies to support gas adoption and commit as a country to demand profiles.

South Africa lacks the requisite fiscal framework to develop and support the midstream gas infrastructure space, without which it will not be able to progress.

“We want to move toward longer-term and regional integration, national planning and energy transition and institutional reform policies . . . we need judicial reform to fast-track energy infrastructure projects in South Africa,” Human elaborated.

Gas Opportunity

The IGUA-SA suggests that regional or domestic gas at scale has about the same potential that coal-based energy has had for about 70 years.

Ultimately, this helped to foster investment appetite that enabled the South African coal industry to flourish, Human noted.

However, the IGUA-SA anticipates that South Africa will not be positioned to meet demand by the mid-2030s, noting, that many of the projects, particularly the Inhassoro, Zululand Terminal or Matola projects, will not be fully operational.

This, Human emphasised, was largely because of inaction, a lack of coordination and a lack of policy support for the private sector, as well as a dearth of engagement between the State and industry.

“There is a market that is starved of gas in the Northern Corridor,” industry representative Petroleum Agency SA CEO Dr Bongani Sayidini noted, pointing out that, based on current timelines, importing liquefied natural gas (LNG) will be required well before the current projection of June 2030.

The major offshore petroleum exploration and gas-condensate production blocks 11 and 12B in the Outeniqua basin, about 175 km off the southern coast of South Africa, could potentially come online by 2032 – about the same time as South Africa can expect LNG, which will be double the price of indigenous gas, he explained.

South Africa still has to contend with other challenges, such as environmental authorisations regarding exploration activities, seismic acquisitions and the drilling of wells, many of which are being appealed at the Department of Forestry, Fisheries and the Environment (DFFE).

“Should [those] appeals be dismissed, they are taken to legal review, stifling the sector,” Sayidini stated.

Mitchell highlighted that delays across the various government departments responsible for authorisations, licences and permits could result in projects stalling or being abandoned. These delays can occur at various levels in the Department of Mineral and Petroleum Resources, the DFFE and the Department of Water and Sanitation (DWS), creating a significant backlog for onshore developments.

Additionally, appeals at the DFFE can take more than two years to resolve, while DWS licences can take more than three to four years to be issued, even before an appeal is considered.

“When we factor in these unnecessary delays, 2030 looks like a pipe dream for some of these projects, and that is the reality of where we stand,” Mitchell concluded.