SA’s gas crisis: Mantashe needs to urgently procure Gas-to-Power and approve Rompco-Lilly Bypass

Sasol’s 865km long gas pipeline in Mozambique. Photo: Supplied

Sasol’s 865km long gas pipeline in Mozambique. Photo: Supplied

Published Feb 21, 2024


By Hügo Krüger

South Africa depends on importing about 160 Peta Joules (PJ) of natural gas from the Gasfields in Pande-Temane, Mozambique.

Facilitating the import is an extensive 856km pipeline called Republic of Mozambique Pipeline Investments Company (Rompco), establishing a vital link to petrochemical firm Sasol’s Secunda plant.

Within the total of 160 PJ of inflow, Sasol uses 110 PJ, while the remaining 50 PJ is allocated for industrial use. Notably, Sasol extends its contribution to the gas supply by allocating an additional 25 PJ Methane Rich Gas (MRG) to customers in Witbank and Durban.

The transportation of the MRG is accomplished through Transnet's pipeline, Lily, that flows from Secunda to Richards Bay.

This natural gas infrastructure holds importance in supporting diverse factories across the Gauteng, Mpumalanga and KwaZulu-Natal regions. The areas are home to a multitude of heavy industries, including aluminium smelters, tiling, mining, brick-making, paper production, steel manufacturing and various other sectors crucial to the economy. At present, these industries rely solely on natural gas, lacking any alternative source of energy

According to Jaco Human, the executive director of the Industrial Gas Users Association of Southern Africa, the nation is facing a significant gas crisis, a challenge that, if successfully addressed, could simultaneously assist in mitigating the persistent issue of load shedding.

The origins of the crisis date from several years, with warnings from 2018 signalling that Sasol’s production had reached a peak in Mozambique.

While the well is expected to continue generating volumes until 2038, it has become evident that the falling reserves will not be sufficient to meet the demand downstream from Sasol’s facility. This shortfall is exacerbated by an expected 10% annual drop in output from the gasfields.

In an effort to anticipate the impending decline in production, Sasol invested strategically in new well drills around 2016 at its Mozambique facility in Pande-Temane. Regrettably, the exploration endeavours yielded no success, intensifying the urgency of the situation.

In August 2023, Sasol dropped the bombshell, announcing its inability to serve downstream customers after June 2026. The decision stems from a strategic reduction in MRG output to generate internal electricity, acting as a bridge until 2028 when the company foresees running out of sufficient natural gas for its own consumption.

The revelation, openly acknowledged by Sasol, not only imperils South Africa’s heavy industry but also triggers concerns about Sasol itself, with a R36 billion financial impairment that could jeopardise the entire industrial economy. Sasol’s earnings before interest and tax fell by 65% to R21.5bn year-on-year in 2023, partly because of the impairment of assets.

As the table below shows South Africa will face an imminent shortage of 65PJ for industrial consumption from 2026 onwards.

The natural gas, which primarily consists of methane, plays a pivotal role in industrial heating processes. The urgency of the gas crisis raises concerns about the potential closure of South Africa’s heavy industries, as they may be forced to cease operations due to the shortage of this critical energy resource.

The most efficient solution to address the shortage is for the South African government to procure at least 2GW Gas-to-Power (GTP) from Mozambique. Sufficient transmission line capacity exists for this solution. A 2GW GTP initiative would generate sufficient volumes for TotalEnergies, leveraging its operations in Mozambique to support the injection of gas into the pipeline.

In addition to serving the customers downstream, Rompco will be incentivised to invest into the Rompco-Lilly Bypass that will take about three years to build.

It is recommended that the South African government enter into a 15 to 20-year Power Purchase Agreement to ensure the viability of the proposed volumes. A 5 Megaton per annum Matola terminal could readily meet the industry’s gas requirements (estimated at 100 PJ) and provide 2 GW Combined Cycle Gas Turbine additional generation capacity for Eskom.

The site at Matola is shovel ready, it is the least constrained solution.

Therefore, by addressing the gas crisis, the South Africa government could simultaneously eliminate two stages of load shedding. A prompt solution lies in a simple phone call to engage with TotalEnergies, Rompco and Mozambique.

The Department of Minerals and Energy simply has to make a commitment to procure 2GW GTP and agree to the construction of the Lilly-Rompco bypass.

All Minister of Mineral and Energy Resources Gwede Mantashe needs to do is issue the instruction and pick up the phone to make a few calls so that our heavy industries can be saved from collapsing.

Hügo Krüger, MSc in Civil Nuclear Engineering.

* The views in this column are independent of Business Report and Independent Media.