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South Africa moves to procure 600 MW gas-fired power project

27th May 2016

By: Terence Creamer

Creamer Media Editor

  

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The Department of Energy (DoE) has confirmed plans to procure a new 600 MW gas-fired power generation project, to be developed as a public–private partnership.

It is envisaged that the private ‘strategic partner’ will work with the State-owned companies (SoCs) to implement the project, with private-sector partners playing the lead role in developing, financing, operating and maintaining the facility.

In a newspaper advert, the DoE indicated that market appetite for the initiative is to be tested through an expression of interest (EoI), with the Independent Power Producer (IPP) Office tasked with procuring the strategic equity partners. Responses to the EoI need to submitted by June 20, after which procurement documentation will be prepared.

A similar public–private procurement model has also been unveiled for the creation of three new solar parks in the Northern Cape. Each park, which will be led by private developers in partnership with SoCs, will have a capacity of between 400 MW and 700 MW.

Energy Minister Tina Joemat-Pettersson reports that she has directed the DoE to undertake more upfront development work for the procurement of imported gas to ensure bankability of the gas-to-power programme for investors, affordability for gas users and the minimum fiscal exposure for government.

“We will make a preliminary information memorandum on the 3 125 MW gas-to-power programme available to the market in the second quarter of the 2016/17 financial year, prior to commencing with the formal procurement process later in the year,” the Minister said in her Budget Vote.

She also indicated that the EoI for the private sector to partner with our SoCs would be facilitated through the development of a “600 MW additional gas determination”.

The DoE will also insist that the gas-fired project be used to facilitate domestic manufacturing and service opportunities in the gas-to-power value chain. In fact, the Minister also indicates that the intention is to deploy government resources to support jobs, skills and downstream opportunities, while enhancing the possibility of upstream exploration and production.

Neither the gas source nor the location of the project is spelt out in the advert. However, it is understood that an assessment is under way for possible siting of liquefied natural gas (LNG) import capacity in Saldanha Bay, Coega and Richards Bay.

The EoI coincides with the formation by the Department of Trade and Industry of the so-called ‘Gas Industrialisation Unit (GIU)’, an initiative designed to maximise the multiplier effects of natural gas for power generation in South Africa.

The GIU includes senior officials from government departments, supported and advised by industry experts and civil society representatives, to oversee the development and implementation of an appropriate gas industrial policy for South Africa and the Southern African region.

Trade and Industry Minister Dr Rob Davies has indicated that, working with the IPP Office and the DoE, the GIU will support the LNG-to-power procurement programme by assisting in driving the development of gas markets and non-IPP gas utilisation within the three ports identified for LNG importation.

“It will also lead South Africa’s outreach on a regional level, focusing on a collaborative arrangement to ensure the development of initial onshore utilisation facilities such as power generation, gas-to-liquids and fertiliser plants,” Davies adds.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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