Investors from around the world, including the US, Japan, Spain, South Korea and China, among others, have met in Cape Town this week to hear more about plans for South Africa’s gas-to-power programme.
A preliminary information memorandum (PIM), which establishes the scope of the Liquefied Natural Gas-to-Power programme for prospective and interested bidders, was unveiled on Tuesday at the South Africa: Gas Options conference in Cape Town, which has drawn over 450 investors, government officials and power developers.
“We are looking for the best price. We need to have affordable gas for industrial and domestic users. It’s going to be a competitive procurement process,” Department of Energy (DoE) IPP Office head Karen Breytenbach told a press conference.
The South African government intends to procure 3 726 MW of new independent power producer (IPP) gas-fired generation capacity, which will be generated from a variety of gas sources.
The government has allocated 3 000 MW to the LNG-to-Power IPP Procurement Programme, with 126 MW allocated to a domestic gas programme and 600 MW set aside for the appointment of a strategic partner for a gas-fired power generation facility.
The 3 000 MW will be split between two ports, Richards Bay, in KwaZulu-Natal, and Coega, in the Eastern Cape.
The request for proposals (RFP) will be conducted in two phases, starting with a request for prequalification (RFQ) process, which will prequalify bidders that satisfy certain key financial and technical requirements required by the DoE. This will be followed by the RFP, where the prequalified bidders will be invited to pay an RFP access fee of R2-million.
This will entitle them to access the RFP and a full suite of project agreements, enabling them to prepare their binding offers to the DoE.
Breytenbach believes the investment will be worth it.
“It’s very different to what we have done before. We are taking a bundled approach. A consortium will buy the LNG and be involved in the private-sector programme to deliver gas in the pipelines and electrons,” said Breytenbach.
DoE deputy director-general Omphi Aphane said he believed gas-to-power would be “game-changing” for South Africa, as it would spark industrialisation and job creation, as well as lower the cost of energy.
He said the facilities at the two ports would service parts of Gauteng, Mpumalanga, KwaZulu-Natal and the Free State.
“We think gas-to-power makes a great deal of sense. Together with renewables, this has proved to work in many other markets,” said International Finance Corporation (IFC) principal investment officer Marcel Bruhwiler.
He said the IFC would provide expertise and financing and was confident about the success of the project flowing from the government’s renewable-energy programme.
“More than 90 projects [with a combined value of] R200-billion have been procured in the renewable-energy programme,” said Bruhwiler, adding that there had been no legal challenges and that the process had been completely free of any allegations of irregularities.
“We see the PIM opening further opportunities for private investment in the energy sector. The use of natural gas is an important step in South Africa’s energy economy. Together with abundant renewables, gas is a powerful combination and affordable for long-term power supply.”
Breytenbach concluded that the DoE was targeting Coega and Richards Bay, “as they are more ready than Saldanha Bay”.
“It may take a little longer to get Saldanha Bay ready for this project,” she said.