By Antoinette Slabbert.

The gas strategy energy regulator Nersa published this week does not focus enough on the development of the domestic gas fields off the West Coast, says Jaco Human, CEO of the Industrial Gas Users Association of South Africa (IGUA-SA).

The industry also needs clarity on the transactional framework for the development of the industry, especially the allocation of risk, he says.

The South African gas industry is at a critical point with the supply from Mozambique set to dry up, a lack of import infrastructure, and little progress on the development of local resources to ensure long-term security of supply.

It is against this backdrop that Nersa has just published its strategy for gas and how to ensure security of supply. It also focuses on its complementary role to renewable energy and hydrogen, says Nomfundo Maseti, Nersa full-time member for piped gas.

“Gas is a key component in the transition to a low carbon economy.”

She adds that with this document, Nersa wants to give leadership and open a dialogue about the gas economy and the need to expand supply options and ensure security of supply to enable economic growth. “It is time for action. We cannot wait until there is a crisis.”

She says there has been “talk and talk and no action”.

“The Gas Amendment Bill has been in the making for 10 years and nothing happened.”

Human says the Nersa document, which sets out the regulator’s view on the road ahead, is a good summary of the current state of the industry and what must be done.

Maseti acknowledges that the information contained in the document is not new, but says it is important that it has been validated by the regulator and will give policy guidance.

Strategy 

The strategy sets out goals linked to timelines, with a focus in the next decade on:

  • Securing sources and infrastructure for importing liquefied natural gas (LNG);
  • Exploring further regional sources, especially from Mozambique; and
  • Developing an enabling environment for the development of domestic gas sources.

Over the same 10-year period, gas import infrastructure should be developed and the local pipeline network expanded, including in unserved areas like Coega and Saldanha.

The strategy provides for the procurement of new gas-to-power generation capacity inland and in Richards Bay in the next five years to ensure demand.

Other measures up to 2050 include the conversion of diesel and coal-fired power stations to gas and the promotion of gas for purposes other than power generation – including industrial and domestic use and transport.

It sets out the necessary policy and regulatory interventions and steps to integrate gas in the generation mix as a complementary technology to mitigate the intermittency of renewables and replace coal.

It addresses the requirements for the integration of low-carbon and renewable gases – including green hydrogen, biogas and biomethane, all up to 2035 – and provides for continued capacity building regarding regulatory, technical and economical skills up to 2050.

Good overview, but …

Human says the document is a good summary of what must happen “at a 30 000 ft level”.

There is however a big focus on LNG, with less emphasis on the development of the domestic gas resources on the West Coast.

“The industry sees LNG as important as a bridging mechanism in the near future, but it is $12/GJ [gigajoule] compared to $6-7/GJ for West Coast gas, which has great potential for reindustrialisation, power generation and economic growth,” he says.

“West Coast gas can industrialise South Africa as coal did 80 years ago,” says Human.

He pleads for much more urgency around the exploration and development of the West Coast gas fields.

“Namibia is beating us.”

Human acknowledges that government is saying the right things about the value that gas can have on the economy, but says there is too little action.

The solution?

The solution is to give clarity regarding the transactional matters.

“The transactional framework does not exist. Government does not have the funds and the private sector cannot carry all the risk,” says Human.

Gas fields are usually developed by the private sector when big, multinational companies invest billions, but the infrastructure – terminals and pipelines – is lacking.

The answer lies in collaboration between government and the private sector. “The question is how to package transactions with regard to risk allocation,” Human says.

Currently the focus is largely on gas for power generation, but industrial use is important, largely in the logistics industry – and there is also a huge opportunity in the maritime industry.

“Especially taking into account our geographic position between East and West.”

IGUA-SA is trying to facilitate the discussion among different role players – upstream, midstream and the market, as well as lawmakers, funders, transaction advisors and academia.

Breathing space, for now

Human says that in the short term, Sasol’s announcement that it will provide the industry with synthetic gas for another two years, after the gas from Mozambique is discontinued by June next year, has given the industry some breathing space.

It spares industrial users from having to conclude long-term gas supply agreements by the end of this year, which would have carried huge risk.

Instead, the industry now has time until late next year, which creates a window to establish an aggregator to pool demand to ensure security of gas supply.

“In 10 to 15 years, we must have domestic gas supply, coming from the West Coast.”