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Mavuso urges public-private collaboration to mitigate looming natural gas cliff

BLSA CEO Busi Mavuso

BLSA CEO Busi Mavuso

4th March 2024

By: Marleny Arnoldi

Deputy Editor Online

     

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Once again policy inaction and government’s inability to commit to large-scale investment will lead to a new blow to energy availability in the economy, with the looming natural gas cliff from mid-2026.

Business Leadership South Africa CEO Busi Mavuso says in her latest weekly newsletter that many industries, from glass-making to beverage manufacturing, rely on gas as an energy source, with natural gas in South Africa to face an almost inevitable supply interruption.

Petrochemicals company Sasol is the main source of supply at the moment, from two gasfields in Mozambique; however, from June 2026, Sasol will fully use the remaining gas from the fields itself and not supply to customers.

Sasol in August last year announced that South Africa was heading for a “natural gas cliff” owing to the Pande and Temane resources, which Sasol secured alongside the South African government in the early 2000s, drying up.

As with electricity, there have been warnings for some time that a natural gas cliff was coming, but no plans for alternative infrastructure have been pursued, putting 70 000 jobs in gas-reliant industries and their R500-billion contribution to the economy every year at risk.

Industrial Gas Users Association of South Africa CEO Jaco Human said in a February 27 briefing covered by Engineering News that businesses will be forced to switch to fuels that are more expensive and environmentally damaging, with repercussions for consumer pricing and carbon emissions.

However, fuel source substitution is not economically or practically feasible in many instances.

He added that the knock-on impact of gas shortages would be acutely felt by consumers through price increases across the steel, aluminium, mining, agriculture, paper, glass, ceramics, construction, automotive and food and beverage sectors.

Mavuso says there are possible solutions, but it will require swift action from government and business working together. She adds that it takes massive amounts of investment to develop new sources of gas and infrastructure for transmission and distribution. Even the best alternative gas options at the moment still envisage a 12- to 18-month gap between the end of Sasol’s supply and any new supply coming on stream.

Some of the other gas sources include major developments in Namibia and Mozambique, as well as the Brulpadda and Luiperd prospects off the Cape coast in South Africa; however, Mavuso explains that there has been no investment in infrastructure to connect these sources of supply to Gauteng and KwaZulu-Natal – where most industrial gas users are located.

In particular, talks on developing the Brulpadda and Luiperd prospects have been stuck for some time owing to uncertainty whether State-owned Petro SA will be the anchor consumer.

In turn, Petro SA’s Mossgas refinery has been idle for four years since its last gas supply source was exhausted.

For TotalEnergies, the owner of the Brulpadda and Luiperd prospects, to commit to the huge investment needed to bring those resources on line, it needs to secure agreements with large-scale buyers, but even if they do, it will take until 2030 for the project to start supplying gas.

Human said the next four months would be crucial to develop the required agreements for gas infrastructure to substitute the shortfall in gas supply from 2026 onwards.

Mavuso agrees, adding that what is needed is a massive coordination effort between the public and private sectors, including potential suppliers and logistics providers. Most importantly, she emphasises, is role of government in creating an enabling environment for the necessary licensing.

“It will not be easy, there are complex technical considerations regarding the sources of gas that are most feasible to tap as well as the ways it can be transported. By coordinating the right expertise, political will and focus on solutions, we can make progress,” Mavuso states.

She warns that long-term secure supply of natural gas is years away and South Africa will need interim measures to fill the gap when existing supply runs out, “we cannot afford to waste another day”.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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