From a fuel and foreign investment perspective, growing a gas industry is a major direct foreign investment opportunity for South Africa, says engineering consultancy WSP Africa power generation director Wayne Lindecke.
He adds that the gas-to-power programme (GPP) is a catalyst to significantly grow the gas industry in South Africa, as it will provide an essential foundation.
Lindecke notes that the current gas supply from Mozambique is limited and, as South Africa is becoming increasingly “gas-thirsty”, the GPP will foster the growth of a gas industry. “The need for gas becomes greater and more attractive because of steadily increasing prices of electricity, owing to the decline of commercially viable coal reserves for South Africa’s power plants.”
He emphasises the energy market’s thirst for alternative fuel and energy sources. In Mozambique and Tanzania, there are “phenomenal” offshore gas discoveries, which Lindecke foresees will provide many economic benefits for South Africa and the region.
However, he adds that, realistically, even if a neighbouring country finds gas reserves, South Africa does not have rights to that gas, unless an established gas industry is developed.
Importing gas from a neighbouring African country will, however, make gas more cost effective, owing to logistical advantages. Infrastructure is needed to develop the industry and for contracts with countries that have natural gas reserves to be finalised.
“South Africa is also bound by protocols to reduce its carbon emissions. This means that the country must find an alternative source for baseload power, as, currently, approximately 90% of baseload generated power is coal-fired,” notes Lindecke.
Although there are several options for alternative power sources, he says gas is a frontrunner. “It is a fossil fuel, but is considered a clean-burning fossil fuel, especially when compared with coal’s carbon emissions.”
Gas is also more efficient and higher in energy value, with significantly less gas required to generate the same amount of power as coal, Lindecke explains, adding that this makes gas a more sustainable and economically viable alternative power source.
The Department of Energy’s (DoE’s) Integrated Resource Plan (IRP) has been criticised. The current IRP requires updating and the gas utilisation master plan (Gump) requires much development and acceptance across the industry. Otherwise, Lindecke says, this could contribute to deterring of international investors from investing in South Africa’s prospective gas industry, as there is no official strategy document explaining to investors what to expect, as well as the country’s plan for developing a gas industry.
Gump is defined as a roadmap for the development of a gas economy and, according to the National Development Plan (NDP), the document is in the process of being finalised. Gump will analyse potential opportunities for the development of South Africa’s gas economy and set out a plan for how this can be achieved. The development of indigenous gas resources and the introduction of a gas supply options portfolio are key objectives.
Although there has been ample opportunity to finalise Gump and make it official, it is not yet accessible to industry stakeholders, creating uncertainty amongst potential investors. “Rigorous planning and research goes into investing in a country, and without Gump or a similar official document that outlines the country’s plans to achieve . . . a gas industry, gas-to-power plans could be further delayed.”
Lindecke encourages the petrochemicals industry to complete the master plan to start the process of further developing a gas economy.