While Gigajoule Africa had met the minimum application requirements when submitting applications for licences to construct gas distribution and transmission facilities, as well as to trade gas, in the Cape West Coast region, it had failed to produce sufficient documentation and evidence, such as proof of gas supply agreements, the National Energy Regulator of South Africa (Nersa) regulator member for piped gas Ethel Teljeur said on Thursday.

The company had planned to source either compressed natural gas (CNG) or liquefied natural gas (LNG) from other parties and bring it on shore to the Cape West Coast, from where it would transport the gas, through a pipeline, mainly to industrial customers along the coast, in the Western Cape and in the Cape Peninsula.

However, the regulator had turned down Gigajoule Africa’s applications, saying that while the applicants, Gigajoule Africa Pipe and Gigajoule Africa Gas, had demonstrated their financial, technical and administrative capabilities, this was not sufficient to warrant the granting of the sought licences under the current conditions.

In an interview with Engineering News Online, Teljeur pointed out that, for instance, the company had submitted memoranda of understanding in terms of gas supply, but full agreements had not been forthcoming.

Other outstanding information had included detailed positions of certain installations. In some cases, the applicant had submitted proposals where a particular facility could be located in an area that was 150 km wide.

Nersa, however, required more detailed information on where these facilities would be situated, otherwise this would lead to open-ended licences.

Further, she pointed out that there had also been some uncertainty on the market side, with the project developer not having submitted proof of take or pay agreements with anchor customers.

Teljeur emphasised that the regulator had not had any problems with the information submitted, but that it could not grant the licences only on the information that had been submitted to it.

The regulator also highlighted that the alternative value pricing model, which had been used in the applications, were not in compliance with the Gas Act and would result in price discrimination.

The applicants had also required an exclusive gas trading licence, which the regulator could not grant.

Teljeur explained that Nersa could only approve an exclusive period for a gas trading licence if the applicant had built a distribution network, the expenses of which it would have to recoup over a number of years.

As Gigajoule Africa had split its applications between the two separate entities, it would not be able to get a trading licence for an exclusive period.

Teljeur added that a number of oil companies had, during the public hearings in September, also voiced their concern regarding the award of an exclusive trading licence to Gigajoule, saying that they had similar projects in the pipeline, which would not be able to go ahead if Gigajoule was given an exclusive trading licence in the Western Cape, which could deter competition.

Gigajoule Africa would, however, be able to resubmit applications for these licences and Gigajoule Africa Gas could still be granted a trading licence, but not for an exclusive period.

The energy company had indicated on Wednesday that it would reconsider its options, depending on the reasons given by Nersa.

Meanwhile, Teljeur said that there was good potential for alternative energy sources, such as natural gas, in the Western Cape region, especially given the expected rise in electricity prices, going forward.

As there were little indigenous energy sources in the region and, given that electricity had to be transported over large distances from inland to the coast, there was a clear case of alternative energy sources in the province.