By Nokwanele Qonde
The announcement of an audacious plan by Electricity and Energy Minister Dr Kgosientsho Ramokgopa to invest R2.23-trillion to build 105 000MW of new generation capacity by 2039 is commendable; however, the envisaged contribution of gas of 11% to the envisioned energy mix seems unrealistic and unfeasible.
While the quest to reduce reliance on polluting fossil fuels such as coal, diesel and illuminating kerosene is laudable, the substantial contribution of gas to the energy mix during the stipulated timeframe is impractical.
The Integrated Resource Plan was approved by the cabinet in October, and it provides a blueprint for South Africa’s future energy journey and assumes that the extensive and prohibitively expensive infrastructure required to operationalise the deployment of gas, whether natural gas or liquefied (LNG), is already in the offing.
The plan makes no mention of an envisaged role that liquefied petroleum gas (LPG) can play in the energy mix.
This is problematic because it overlooks the significant contribution that LPG can make, and is already making, as an alternative energy source that is environmentally friendly, cost-efficient and reliable.
The omission disregards the fact that this energy source is increasingly being used for large-scale power generation in other parts of the world, especially in remote areas and developing regions that cannot be connected to the natural gas network.
We can draw important lessons from our Brics partner, India, where a government flagship called Pradhan Mantri Ujjwala Yojana provides deposit-free LPG connections to low-income households.
India’s LPG residential penetration reached 99.8% by 2021, up from 62% in 2016.
Ramokgopa correctly pointed out that South Africa is facing a “gas cliff” by 2028, as the country’s main source of natural gas supply in Mozambique is nearing depletion, with the new gas development projects not guaranteed to commence production around 2030 as forecast, given that country’s own challenges.
The reality is that there are no immediate plans for the rollout of an expansive LNG network or the construction of LNG terminals and regassification plants to mitigate against the gas cliff that will be deployable early enough to achieve the 11% contribution by 2039.
It is therefore baffling that the Integrated Resource Plan is based on the presumption of availability of supply that we don’t readily have and must import from other markets that have committed themselves to long-term supply agreements with countries that already have the requisite infrastructure.
In addition to lacking the infrastructure to make natural gas a viable alternative in the energy mix, SA lacks the infrastructure to drive an LNG economy.
The vision is there, but a Herculean task awaits us to get to a point where this vision is translated into reality.
As a roleplayer in the oil and gas space, we have first-hand experience of being informed by natural gas producers that they cannot guarantee supply in the timelines the minister is talking about, more so when there is a notable absence of an infrastructure that can support this supply.
Natural gas is a commodity that is traded by global oil conglomerates and international trading houses to different countries that are light years ahead of South Africa in terms of available gas and energy infrastructure.
These countries and regions in the EU and Asia are their top priority markets.
The traders will not compromise available stock based on yet-to-be-executed plans and will supply to countries that have heavily invested in infrastructure to utilise gas.
An unintended result of sourcing natural gas in the absence of an infrastructure network to support it will have the unintended consequence of driving up the cost of imports as exporters hedge pricing to mitigate the risk.
Moreover, there is a paradox that the adoption of LNG presents to policymakers and to the government. LNG exporters and traders are concerned about the availability of a market that will absorb their supply.
So, even if the network infrastructure were in place in time, we would still need to demonstrate the availability of a large-scale captive market that will absorb this supply and anchor the huge investment required.
This is the conundrum that the government is facing. It’s a chicken-and-egg story: which comes first, market availability or infrastructure?
On the flip side, the decision by Eskom to utilise natural gas as one of the energy sources bodes well for creating a market for LNG.
Without an anchor like Eskom that would utilise the supply of natural gas for power generation, then the model doesn’t work.
It is great that Eskom is coming on board, and they have to because somebody has to take the lead, and there is no more worthy entity than the government.
The ubiquitous availability of LPG provides the government with an excellent opportunity to plug the energy gap and include this clean source of power as a viable part of the energy mix.
• Qonde is the founder and managing director of WASAA Group
