SA gas users plan venture to secure supply before 2026
9:16 CAT |
11 Jul 2024
South Africa’s industrial gas users are planning to form a company that will ensure supply after the sole provider of the fuel said it will halt the flow in 2026.
Sasol Ltd., which has provided gas to customers through the 865-kilometer Rompco pipeline from its fields in Mozambique, has said it will stop the supply in two years.
The Industrial Gas Users Association of Southern Africa, a lobby group with members including Arcelor Mittal SA and Coca-Cola Co., has warned that without fuel supply companies will have to fire workers and shut businesses.
“A non-exclusive joint venture agreement is being concluded with approximately 30 large and small users of piped gas in South Africa,” the group said in a statement. It’s planning an externally funded, private company based on a cost-pass through model.
A feasibility study outlining the legal, regulatory, economic and operational viability of the proposed company has been concluded.“
Constructive discussions continue with Sasol and international oil companies, gas infrastructure developers and operators to ensure continued gas supply beyond 2026,” the group said.
Impending crisis
South Africa is facing an impending supply cliff due to Sasol’s move to curb production of the fuel from its fields in Mozambique between 2026 and 2027.
Warnings from the Energy Council of South Africa have flagged the devastating impact on the country should this not be addressed, including endangering 300,000 to 400,000 jobs at the firms that use gas for industrial purposes.
ECSA chief executive James Mackay warned in November 2023 that “there isn’t currently a supply alternative that will readily be available in the time frames needed,” saying that urgent policy direction and execution were needed to avert disaster.
“We do need a national focus on saying where that supply will come from, and there are a number of opportunities,” he said at the time.
He suggested that gas could be imported through a port in Mozambique, or facilities could be speedily erected at South African harbours such as Richards Bay or Coega.
One of the other glimmers of hope for the sector was the potential operationalization of a gas field off the west coast of the country by TotalEnergies. This could have been in operation by 2030.
However, this entire prospect has now been thrown up in the air, with the discovery reportedly being abandoned, and TotalEnergies said to be instead concentrating on exploring the Orange Basin, located further north on the Atlantic coast of South Africa near promising oil discoveries in Namibian waters.
Gas Master Plan
The South African government is well aware of the looming crisis.
In April, the former Department of Mineral Resources and Energy (now the Department of Petroleum and Mineral Resources) tabled its ‘Gas Master Plan’ for the country.
The master plan lays out the department’s intentions to make gas a critical component of South Africa’s energy mix and presents various ways to introduce and grow supplies based on different demand scenarios.
This includes new gas builds across the country, as well as conversions for Eskom’s “retiring” power stations.
Key among the proposals is the call to action “to mitigate against gas supply shortages between 2026 and 2030” by urgently engaging “within the region to establish enablers that could unlock additional supply potential”.
However, critics of the plan have pointed out that it does not do enough to address the shrinking timeline to meet the expected shortage, nor does it go into detail about financing and funding – crucial elements that need clarity for the plan to be viable.
According to the Industrial Gas Users Association of South Africa, if industry cannot get gas, it will be forced to switch to other fuels which could be more environmentally damaging and expensive.
These higher costs would ultimately be passed on, and end-users or consumers would see higher prices.Source: Businesstech (Bloomberg
SA gas users plan venture to secure supply before 2026 | Club of Mozambique
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