Govt push for gas expected to continue

30th January 2015

By: Bruce Montiea

Creamer Media Reporter

  

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There is likely to be continued support from the South African government this year to promote gas as an alter- native source of energy, says professional services firm EY Africa energy sector leader Claire Lawrie.

“There is demand for gas in South Africa from households and industry. Therefore, we are likely to see plans to convert gas into power,” she says.

Lawrie adds that South Africa has 30-billion cubic metres (bcm) of proven gas reserves, “which is significant, but still not being monetised enough to meet demand”.

She highlights the increased interest from government and companies in new gas exploration developments as positive, adding that new technology has also helped the industry deal with the challenges in gas extraction, such as working deep wells.

Lawrie also highlights that new exploration licences for oil and gas have been issued to energy majors and independent gas companies. She says this not only indicates interest in the gas sector but is also a positive development, since more gas will be made available to consumers.

“I foresee continued foreign direct investment in gas,” Lawrie notes, adding that South Africa has the potential to produce the necessary gas to meet the demand.

Currently, gas comprises less than 5% of the energy mix in South Africa, and the country’s ability to generate enough power for the economy has been dominated by coal.

Nevertheless, Lawrie says gas’s stake in the country’s energy mix is expected to double. “Government is doing the right thing by prioritising gas, and it has done well by having [the Mineral and Petroleum Resources Development Act] in place to oversee the industry.”

While the South African gas industry faces several challenges, Lawrie points out that it is managing.

One of the challenges facing the industry is that it has had to deal with rising costs. “Easy-[to-reach] oil is gone and drilling anew is costly, as it is complex.”

However, Lawrie says the future is bright for the industry, as government is on the right track with its long-term strategy of promoting gas use, accompanied by the necessary commitment.

She adds that, in the private sector, energy companies are needed to continue investing in the gas industry, which requires regulatory clarity.

Government and business must work together to create a viable environment for investment, says Lawrie.

“Make gas attractive so that you can keep investment in the sector,” she concludes.

Edited by Samantha Herbst
Creamer Media Deputy Editor

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