Latest news with #IGUA-SA
News24
08-05-2025
- Business
- News24
Gas users face R11bn hurdle to secure LNG imports and avert a gas cliff
Gas users are working to avert a supply crunch, but the guarantees required are enormous. Industry will engage with banks and the state in hopes of finding a solution. Although Sasol has helped with an interim plan, industry needs to land LNG by 2030. For more financial news, go to the News24 Business homepage. A whopping R11 billion in guarantees currently stands between industrial gas users and their ability to import liquefied natural gas (LNG) to sustain their operations in the face of a looming gas supply cliff in South Africa. Industrial gas users, who support some 65 000 jobs and contribute around 10% to national GDP, have come together to form GasHub, a nonprofit aggregator. GasHub aims to consolidate gas volumes to unlock LNG supply and secure the associated infrastructure development. But the industry has found that the sum total of guarantees that need to be put on the table is simply enormous. 'In the next three months, that's going to be the absolute key conversation between us, the state and banks. How do we structure this guarantee?' Jaco Human, CEO of the Industrial Gas Users Association of Southern Africa (IGUA-SA) told News24 on the sidelines of the Natural Gas Symposium, which was hosted by Wits Business School on Wednesday. 'The reality is industry cannot bring it alone. It's too much, it's $600 million (about R10.9 billion) in guarantees … We need to find this solution because this is the only thing that's missing right now to enable a transaction.' The urgent effort to secure LNG comes as the existing gas supply from Sasol's Pande and Temane gas fields in southern Mozambique is running dry. The synfuels and chemicals giant originally warned customers that their supply would be cut off from 2026. It subsequently has been able to extend that deadline to 2028. In the absence of domestic gas finds moving toward production, LNG is acknowledged as the only viable medium-term solution for industrial users. Sasol has, however, now come forward with an interim solution for industry in the form of methane-rich gas which it derives from coal and uses to produce synthetic fuels and chemicals. Sasol is willing to divert some of it to industrial customers from 2028 to 2030, although this will come at a higher cost to compensate for the impact on its operations. While the methane-rich gas option has brought with it some welcome respite, Human said it realistically only buys the industry an extra nine months to get the LNG solution in place. 'We are already behind in terms of schedule, so it's a compressed timeline that we now face,' Human said. So now, 'instead of concluding LNG contracts by the end of this year with international oil companies, terminal developers and pipeline companies, we now have a bit of breathing space to conclude it in the second half of next year.' While there are two proposed LNG import terminals in the works – one at the Matola Terminal in Mozambique and one in Richards Bay – final investment decisions have not yet been made. For now, Matola has emerged as the most practical solution for industry in the near term. But volumes are an issue. Traditionally, Sasol has been the major anchor customer, consuming two-thirds of the gas piped from Mozambique into South Africa. But without such a big user in the mix, the industrial gas users are at a disadvantage. 'If you don't have a lot of volume, two things happen to you. The risk profile in the project for the investors and the lenders increases, and the tariff goes up because you've got lower throughput. That's the struggle we're having at this point,' Human said. 'Right now, the industrial volume is not sufficient to bank this project.' Gas-to-power is often considered an essential anchor customer for the economic importation of LNG, especially in emerging or developing markets. Such projects typically have long-term power purchase agreements and consistent demand for fuel for as long as 10 to 20 years. Eskom has plans to be such an anchor customer. Eskom's GM for gas and oil, Aubrey Mzobe, said the utility was serious about executing gas-to-power projects 'with speed and without cutting corners'. The list of Eskom gas-to-power projects in the short to medium term amounts to between 5GW and 6GW, with a cumulative cost of more than R100 billion. He said Eskom would apply the 'tough lessons' learnt from the new-build programme, which included the long-delayed and expensive Medupi and Kusile power stations. While building gas-to-power plants is new to Eskom, Mzobe said the utility would work with industry experts. Eskom does, however, have expertise in operating and maintaining the open-cycle gas turbines, which are similar to gas-to-power plants, he noted. The utility is committed to ensuring that the landed price of gas will be 'competitive and affordable', he said. Beyond LNG, domestic gas is seen as the best solution in the long term. The economics are notably different when it comes to domestic gas, which is projected to cost between $6 and $7 per gigajoule, whereas delivered LNG costs between $11 and $12. But Ebbie Haan, a global oil and gas consultant, said South Africa was simply too late on developing its natural gas. The only way to address the gas issue now is to import supply, he said. 'Buy it from someone who has found it and is producing it – and pay the price for being too late,' he said.
Mail & Guardian
01-05-2025
- Business
- Mail & Guardian
Towards a Natural Gas Compact for South Africa
Natural gas plays a vital role in South Africa's industrial base, powering sectors such as petrochemicals, steel, glass, ceramics, automotive, food processing, and pulp and paper. It is a strategic feedstock and enabler of industrial activity and jobs. At present, South Africa relies almost entirely on a single source of natural gas: the Pande–Temane fields in Mozambique, delivered via the Rompco pipeline. However, these reserves are in decline and are expected to be depleted within the next few years — a looming supply gap that has serious implications for energy security and industrial continuity. South Africa, hence, faces a looming 'gas cliff' — a sudden drop-off in supply as existing natural gas reserves run dry, with no replacement supply in place. If not urgently addressed, this gap could have wide-ranging economic consequences. The Industrial Gas Users Association – Southern Africa (IGUA-SA) warns that over 50,000 jobs across the gas value chain are at risk. Beyond its economic relevance, natural gas is often positioned as a transition fuel for countries to have a viable low-cost energy source to realise their net-zero commitments towards decarbonising their economies by 2050. The net-zero imperative is in line with the objectives of the Paris Climate Agreement which seeks to keep the rise in global temperatures well below 2 degrees Celsius (2°C) as compared to pre-industrial levels. Natural gas burns cleaner than coal and oil-derived products, emitting roughly half as much carbon dioxide (CO 2 ) per unit of electricity generated — making it a lower-carbon option for delivering the same energy output. This has made natural gas an attractive solution for countries seeking to decarbonise and clean up without compromising industrial stability. It is why many countries see it as a necessary part of the energy mix, at least in the interim. This is especially true for hard-to-electrify sectors – such as steel, cement, petrochemicals, and heavy-duty transport – which require high-temperature heat and carbon-based feedstocks. However, the 'transition fuel' framing has its critics. It is argued in some quarters that the continuous use of natural gas risks locking in fossil fuel infrastructure and delaying the shift to renewables. For South Africa, and indeed other countries in the Global South, the focus should not be on the choice between gas and renewables, but on securing affordable, reliable energy that supports industrial development and climate goals in parallel. In this context, natural gas could play a time-bound and significant role — if managed within clear net-zero pathways and backed by firm emissions controls. Natural gas also plays a critical role in electricity generation, particularly as a flexible, fast-ramping fuel that complements intermittent renewable resources like wind and solar. In this way, it serves as a stabilising force in power systems undergoing transition. On the African continent — where over six hundred (600) million people still lack access to electricity — leveraging natural gas alongside renewables could unlock major gains in energy access, security, and system reliability. As Demba Diallo of the Africa50 Infrastructure Investment Platform notes, Africa's abundant gas reserves position it well to use gas as a 'right tool' for the just energy transition. A recent report by BCG and the National Business Initiative ( The Role of Gas in South Africa's Path to Net Zero ) emphasises that natural gas must be used responsibly and with awareness of time limitations, integrated with an aggressive expansion of renewable energy and grid upgrades. The report again underscores that without decisive action, South Africa may regress to more carbon-intensive fuels, compromising both its energy security and its net-zero pathway. It supports the responsible use of natural gas as a transition fuel — not in isolation, but alongside accelerated investment in renewables and clean technologies as innovations like carbon capture, usage and storage (CCUS) mature, they could help reduce emissions from gas-dependent sectors. WBS Academics Marista Fey The implications of a gas cliff go beyond energy security. Failure to act to secure and use natural gas in the interim could be a major setback for economic development and climate policy alike. Navigating the trade-offs around natural gas demands more than theoretical debate — it requires pragmatic, fact-based engagement. The upcoming symposium on the state of South Africa's natural gas supply, hosted by Wits Business School's African Energy Leadership Centre (AELC) on 7 May 2025, is both timely and necessary. It offers a critical opportunity to move from abstract discussions to tangible strategies for securing South Africa's future energy mix. Discussions will address key barriers: policy uncertainty, infrastructure financing, and regulatory bottlenecks. A particular focus will be placed on the urgent need to develop gas infrastructure, especially the systems required for liquified natural gas (LNG) importation — including terminals, regasification facilities, storage capacity, and integration with existing pipelines and industrial networks. These are large, capital-intensive projects with long lead times. Without immediate action and clear investment commitments, South Africa may miss the narrow window to have infrastructure operational before current supplies run out. Organisations such as Transnet Pipelines, Vopak, and Egoli Gas will share insights into the current state of South Africa's gas infrastructure and the gaps that need urgent attention. Their contributions will help shape a realistic action plan aligned with both economic resilience and climate ambition. The envisaged outcome is the development of a new compact for a resilient and well-functioning South African gas sector — one that safeguards industrial competitiveness, job creation, drives inclusive socio-economic development, and ensures that the use of natural gas meaningfully supports, rather than hinders, South Africa's transition to a net-zero economy by 2050.
