South Africa delays decision on LNG imports to next year

Source: Heren


The development of South Africa’s LNG import projects is facing another delay because a document that will define the level of the country’s gas demand is yet to be finalised, sources said.

An integrated resource plan (IRP) designed to give a clearer picture of electricity demand in South Africa was finished in March this year but still needs to be finalised by the government.

Requests for qualification (RPQ) for the country’s LNG-to-power programme were scheduled to be issued by the third quarter of 2017, but have been postponed until the IRP is finalised.

An oil and gas analyst source in South Africa said that the new deadline for finalising the resource plan and RPQ is February 2018.

“I don’t expect a further delay,” the source said. “The [energy] department has assured investors that the IRP is nearly finalised and is on track to be issued on time. Final changes to the document are being done at the moment.“

David Mahlobo became new South Africa’s energy minister on 17 October. The change in the government may be one of the reasons for the delay.

But the major issue with the development of LNG projects is a lack of potential gas and LNG buyers in the country, with the government being the only guaranteed buyer at the moment.

“Infrastructure development would not be a problem, but they need to find buyers who would purchase a sensible quantity of LNG,” a legal source in oil and gas said, adding that the government made it clear that it will not be investing in LNG import terminals.

South Africa’s Department of Energy did not reply to an ICIS request to comment.

The country has three potential LNG import projects – one in Richards Bay in KwaZulu-Natal Province, another in Ngqura (Coega) in the Eastern Province and a third one in Saldanha Bay.

The legal source said that the Richards Bay project was “the only one real project” and that it will be the first one to be developed.

“But it’s still unclear who will be building LNG infrastructure there and who will charter a [floating storage and regasification unit],” the source said.

The region where the project is located has extensive metal and mineral production. The source said that it would make sense for an aluminium producer, or a company involved in the production of metals and minerals to be an LNG buyer for the Richards Bay project.

South Africa has insufficient transportation infrastructure.

Paul Eardley-Taylor, head of Southern Africa’s oil and gas department at Standard Bank in Johannesburg, said in a presentation late last month that even if there is a fast-track development of an LNG project in South Africa, it will not be ready until 2023-2024, as tenders would need to be held and combined cycle gas turbine infrastructure would need to be built.

The country’s gas consumption was 5.1 billion cubic metres in 2016, up 1.3% from the previous year, according to the 2017 BP statistical review of world energy. Over the 10 years to 2015, gas consumption in the country rose by almost 5%.