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Transnet prepares to invite bids for Richards Bay LNG terminal

21st April 2022

By: Terence Creamer

Creamer Media Editor

     

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The State-owned Transnet National Ports Authority (TNPA) reports that a request for proposals (RFP) will be issued in the coming months for the development of a liquified natural gas (LNG) terminal at the Port of Richards Bay, in KwaZulu-Natal.

TNPA has confirmed with Engineering News that it anticipates releasing the RFP by July.

The tender process follows confirmation by TNPA that it received 19 responses to a request for information (RFI) released on February 13 to assess market interest in the design, development, construction, financing, operations, maintenance and transfer of an LNG terminal in the port’s South Dunes precinct.

Port manager Captain Dennis Mqadi reports that the respondents included experienced developers and operators of gas infrastructure in South Africa, Europe, Asia, North America, and the Middle East.

He said the project was aligned with the Department of Mineral Resources and Energy’s strategic plan for the development of a domestic gas market and also supportive of the country’s Integrated Resource Plan for electricity, which has a 3 000 MW gas-to-power allocation for development by 2027.

“To that end, TNPA intends to approach the market in the coming weeks with a request for proposal, which will ensure that the project can be realised within the 2026 timeframe that it is required,” Mgadi said in a statement, adding that the tender process would be “open and fair”.

Richards Bay is viewed as one of several potential sites for the development of LNG import infrastructure in South and Southern Africa, with planning for a terminal at the Matola harbour, in Maputo, in Mozambique, believed to be well advanced.

Both Sasol and Eskom have registered an interest in possibly securing the additional gas that could flow from a terminal in Matola, given its proximity to the existing Rompco pipeline, linking South African gas consumers with gas supply from southern Mozambique.

Sasol has signed a draft term sheet for the delivery, from 2026, of LNG to its Mpumalanga complex, while Eskom has indicated that there may be potential to repower some of its decommissioning coal plants in the same province with gas solutions.

A separate RFI, meanwhile, has also been issued to assess the implementation options and market appetite for the creation of an LNG import hub at the Port of Ngqura, in the Eastern Cape.

That document has been issued by the Central Energy Fund, which has established a joint development agreement with Transnet and the Coega Development Corporation to facilitate a possible terminal adjacent to the Coega Special Economic Zone.

Transnet has highlighted the potential of Richards Bay previously, noting that the cost of gas supply could be reduced by linking it to existing port and pipeline assets, including the Lily pipeline and parts of the Durban-to-Johannesburg pipeline.

However, Richards Bay is far from Eskom’s Ankerlig and Gourikwa open-cycle gas turbine power stations in the Western Cape, which currently produce electricity using diesel, but are technically able to operate on gas.

The State-owned utility intends approaching the market soon for possible LNG supply to both power stations.

There is, however, ongoing opposition to the introduction of an imported fossil fuel, particularly for use in the electricity sector.

A recent report by the International Institute for Sustainable Development (IISD) argues that a pause should be placed on any gas-to-power development until at least 2030, given its analysis that gas supply to balance higher penetration levels of variable renewable electricity will be unnecessary until 2035.

The IISD report also argues that there is no economic case for bulk or peaking supply from new-build gas plants and that there is even uncertainty about the role of gas in providing future balancing or back-up capacity.

However, the South African Oil & Gas Alliance’s Craig Morkel expresses the organisation’s support for the role of LNG imports and local gas as set out in the Integrated Resource Plan of 2019.

“South Africa needs every megawatt of electricity that can be generated in the shortest possible time,” he argues, adding that the Port of Saldanha Bay should also be prioritised by TNPA for an LNG import terminal.

Morkel notes, too, that under the Risk Mitigation Independent Power Producer Procurement Programme one of the preferred bidders was given the right to develop LNG infrastructure at the ports of Richards Bay, Ngqura and Saldanha Bay, including floating storage and regasification units and pipeline connections.

“If third party access to that LNG import infrastructure cannot be guaranteed, then the additional infrastructure that would be required at each of the three LNG ports to meet the demand would also need to be planned and procured quickly.”

Third-party access may become irrelevant, however, if the bidder does not achieve financial close, at the end of April.

Morkel anticipates that there could be further “vexatious” litigation against the roll-out of new gas-to-power generation capacity.

“This type of litigation is not productive and delays us addressing the energy poverty and economic development challenges we are currently facing" Morkel asserts.

Edited by Creamer Media Reporter

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