South Africa’s is facing chronic electricity supply problems, which have resulted in the power system being extremely constrained and vulnerable, which has resulted in load shedding at times. Its problems are occurring, in part due to problems experienced in completing new generating and distribution capacity to meet on-going growth in demand.
Industry experts suggest that the country could be facing a potential power supply gap of between 10 to 15 GW by 2025 in the country, caused by the planned closure of 6 to 10 GW of life- expired coal plants, maintenance issues, delays in completion of existing planned power generation and distribution projects.
New build gas power generation capacity is regarded as one of the best ways to tackle South Africa’s power shortages and quickly provide spare capacity for new future demand, once the economy picks up. Gas to power projects is seen as a quick, easy, reliable, relatively cheap solution for bringing new power generation capacity on line quickly. South Africa aims to add an initial 3.1 GW gas generations to the existing 1.35 GW of gas generation.
The problem is South Africa, at present does not have access to developed commercially significant gas fields to meet the extra demand for gas. It will have to import new gas supplies. The options include either bringing in gas from fields that come on-line in 2020 in northern Mozambique, by pipeline or using LNG tankers.
The cheapest option is to use LNG tankers to deliver gas to LNG re-gasifiers in major ports, such as Saldanha Bay near Cape Town, East London and Richard Bay for onward distribution to local power plants and industries. Such LNG import ports offer the flexibility for South Africa to import gas from not only northern Mozambique but also elsewhere.
The second is to construct a new pipeline linking Johannesburg with the northern Mozambique gas fields. In addition, South Africa would have to build from scratch a natural gas pipeline network to link up major industrial centres and cities. The third is to await for the discovery of commercially weighty production of onshore shale or coal gas or offshore natural gas. At present, although geology is favourable, no commercially significant discoveries have been made so far. It is also likely to take at least 10 years to develop such gas fields to come online.
The LNG import ports scheme connected to local power plants offers several advantages over its rivals. It means gas power stations can be close to markets, aid grid flexibility, and support the development of new markets for gas. Since, once such local markets are developed, the business case for constructing a gas national pipeline network, linking South Africa’s gas import gateway of Johannesburg with such major industrial centres such as Cape Town and Port Elizabeth, substantially improves.
The big challenge for project promoters of whatever option is chosen is ensuring that such a scheme are “bankable”, that is ensuring that all the boxes have been ticked to meet the criteria of potential funders and governments. For instance, that the project participant’s capability, record of accomplishment, together with the quality of sponsors and shareholders is proven.
However, what is clear is that South Africa is likely to opt for an integrated LNG-to-power solution for its 3.1 GW gas-fired independent power producer (IPP) tender to streamline development of the country’s nascent gas industry. The request for proposals (RFP) will be published in Q2 2016.