Energy multinational Shell says South Africa would be able to recoup the capital costs associated with a liquefied natural gas (LNG) import terminal within three to four years by using the gas to replace diesel at Eskom’s open-cycle gas-turbines (OCGT) in the Western Cape.

The electricity utility spent a whopping R10.5-billion on diesel fuel in 2013/14 to operate the Gourikwa and Ankerlig facilities, which together produced 3 621 GWh, translating to a load factor of over 19.3%.

In addition, following the recent collapse of a coal silo at the Majuba power station, in Mpumalanga, Eskom indicated that it might need to lean more heavily on the OCGT plants during the high-maintenance summer period.

Shell LNG business development manager John Shoobridge argued on Wednesday that the savings associated with switching the plants to gas should be more than sufficient to offset fears over the infrastructure costs associated with a LNG terminal, which he acknowledged would be significant.

The final cost would depend of the site and type of terminal selected, with Shell studying various possible locations after PetroSA confirmed that the ocean conditions off Mossel Bay were not suitable for a floating storage and re-gasification unit.

PetroSA had estimated the capital costs of such a terminal – which would have supplied gas to both its gas-to-liquids plant and Eskom’s Gourikwa plant – at between $375-million to $510-million. The National Oil Company indicated recently it was now interrogating alternative locations for a terminal.

Shoobridge suggested the terminal could be developed as public-private partnership and indicated that Shell was already studying possible sites near Saldanha Bay, off the West Coast, Coega, in the Eastern Cape, and Richards Bay, in KwaZulu-Natal.

“South Africa is very concerned about its balance of payments. Well  . . . displacing the current amount of diesel that is being burnt at the OCGTs . . . can save us as much as $100-million per year,” he added.

The other potential spin-offs envisaged by Shell included creating capacity to increase gas-to-power output in the short term, while laying the infrastructure foundation for a future gas market based on domestic gas that could be mined offshore, or in the Karoo basin, where Shell is keen to explore for shale gas.

Shoobridge estimated that South Africa could developed LNG import capacity within three to five years and said the gas-fired power plants could be developed in parallel.

Gas-fired plants, he added, were far quicker to develop than either coal or nuclear and were generally half the capital cost of a coal-fired station and a fifth that of a nuclear plant for an equivalent size.

LNG imports had reportedly been incorporated into the Department of Energy’s Gas Utilisation Master Plan (Gump). However the draft plan, which was expected to be released in June, had not yet been published.

Gas advocates believe the Gump should be receiving priority, largely owing to the relative speed at which gas solutions can be deployed in the electricity sector.