The South African Oil and Gas Alliance (SAOGA) cautiously welcomed the certainty and direction provided by the recently released Integrated Resource Plan (IRP), but noted the lower than expected role of gas in South Africa’s envisaged energy mix, SAOGA executive director Niall Kramer stated.
Commenting on the release of the IRP, Kramer noted that some of the gas sources are expressly anticipated as accelerated exploration and production. “We welcome this, although the now more cautious role for liquified natural gas (LNG) is surprising,” he said.
He added that, until the document has been fully digested and a deeper common understanding prevails among stakeholders – “the devil remains in the detail”.
Most pressing in respect of LNG will be the procurement model and related details, he explained.
The IRP sees gas providing 3 GW of new capacity with 1 GW coming on line in 2023 and a further 2 GW of LNG coming on line in 2027.
LNG imports remain crucially important, owing to South Africa’s urgent need for more power and industrial applications.
While this could have a catalytic effect on the ports of entry, the large-scale build-up of infrastructure at these ports remains unlikely, Kramer said.
“What we will see is the conversion of the existing peaking plants at Saldanha Bay, Mossel Bay, Durban and Coega, all of which will have lower gas utilisation.
“Coega has been identified as the first port for LNG import infrastructure and a gas-to-power plant programme, and we will need to see how LNG will be moved from Coega – probably in virtual tankers or by ship,” he added.
Further, while the tentative scale and economics seem uncertain, some power investors and South African value chain suppliers remain interested.
Scale is a big factor and fleshed-out certainty is needed for the Coega region on other key factors such as timelines and sovereign guarantees to mitigate the risk.
“Despite Coega being the preferred port of entry, Richards Bay has indicated that a viability study is under way and Saldanha may still want to import LNG independently, meaning we could still have several ports importing LNG.”
Kramer added that, while the current focus is Coega, he expects that LNG-to-power will not be imported under the 2016 bundled terms and that a more organic model could be preferred.
During a recent CNBC Africa interview, Kramer indicated that Southern Africa is home to significant energy reserves.
“Along the eastern coast, Mozambique has roughly 170-trillion cubic feet of gas reserves, while on the western Atlantic coast we have numerous gas-producing countries, including Angola. There is no reason why the geology should stop at our political borders, but the challenge remains policy certainty.”
Kramer said that to catalyse exploration investment, a fiscally attractive stable Bill, possibly in the form of the Petroleum Development Bill, is needed.
Additionally, he noted that, the recent discovery by petroleum refining company Total and their partners off Mossel Bay, relatively near to Coega, gives South Africa a good reason to be optimistic.
The IRP has provided a certain amount for gas and the next stage for South Africa to be ready in terms of business capacity, skills development, infrastructure development and harmonised regulation, Kramer commented.