South Africa Warms Up To Gas - Africa’s premier report on the oil, gas and energy landscape.

South Africa Warms Up To Gas

First it was the National Planning Commission report. Then came the Cabinet’s lifting of moratorium.

Overnight, the mainstream thinking of the South African political and business elite has changed from “gas-is-not-on-the cards” to “its -okay-to-include-gas-in-the mix”.

The South African National Planning Commission’s revised plan, released in August 2012, repeated its cautionary note on the cost of nuclear power, the country’s preferred alternative to fossil fuels, and suggested a diverse mix of energy sources. The Commission said: “If gas reserves are proven, and environmental concerns alleviated, then development of these resources and gas-to-power projects should be fast-tracked.”

Several days after the Planning Commission’s report was aired all over the media, the government lifted a year- long moratorium on Shale Gas Exploration.

And then, the South African media went agog with discussions about the imperative of gas in the country’s energy mix.

South Africa’s energy policy has not always viewed natural gas, the world’s least polluting fossil fuel, as an important resource for its planned, massive increase in electricity supply capacity.

The Integrated Resource Plan (IRP) for the country, published as a government gazette in May 2011, envisages an addition of 42, 600MW of new build electricity generation capacity between 2010 and 2030, to all existing and committed power plants. The plan assumes a nuclear fleet of 9,600MW; 6,300MW of coal; 17,800 MW of renewable;  and 8,900 MW of other generation sources, which includes only 2, 400MW of close cycle gas turbine generated power.

The installed open cycle gas turbines currently generate 1,316MW, or a mere 4% of the country’s nameplate capacity. Two of these four gas plants-the 588MW Ankerlig plant and the 438MW Gourikwa plant- were commissioned only in the last six years. Before they were built, the country was generating just 342MW (171MW each) from two plants: Acacia and Port Rex. South Africa’s power utility Eskom currently supplies 45% of Africa’s power and 95% of its own country’s electricity, mostly from coal-fired plants. There’s limited space for more private sector generation in the medium to the long term.

We have argued, in this magazine, that even the 2,400MW of gas fired electricity in the IRP, a 20 year resource plan envisaging a build of  42, 600MW, is a mere after thought. The national conversation around energy issues in South Africa has involved every conceivable energy source but natural gas. The roll out for installation of renewable energy plants has kicked in; there’s a vibrant discussion of the possibility of scaling up nuclear power generation in the country, even if there are more skeptics than optimists; and the place of coal in the country’s energy future is assured.

But no one was, really, discussing gas until recently. The IRP had extensive input from a wide range of stakeholders in the energy industry.

A key reason for the aversion to gas utilization in S.A’s energy mix is that while the country doesn’t have much gas reserves, it considers the cost of imported gas as rather too high.  Take this liner in the plan:  “The import coal and hydro options are preferred to local options, but imported gas is not preferred to local gas options”. So, even while South Africa has the opportunity to benefit from the recent natural gas finds offshore Mozambique, one of the  most significant hydrocarbon discoveries  on the planet in the last 10 years.

The current upbeat mood about gas in the South African national conversation is driven largely by the optimism that Shale gas exploration would unlock trillions of cubic feet of shale gas in the Karoo.

The discussion still has not accommodated nuanced reviews of the opportunities afforded by gas pools in neighbouring countries.

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