Richards Bay Industrial Development Zone (RBIDZ) is ready to play a crucial role in South Africa's gas infrastructure as the country faces a short-term critical decline in the availability of molecules from Mozambique and through the transition from primarily coal-burning electricity generation. This is according to RBIDZ chief operations officer Muzi Shange, who was a participant in a panel discussion on the role of gas in southern Africa's energy mix that was held as part of Africa Oil Week 2024 in Cape Town last week.
The conference attracted numerous energy ministers, officials, company executives and other stakeholders in the oil, gas and energy field from across the continent. Liquefied Natural Gas (LNG) is at the centre of Africa's transition to renewables, as it is the cleanest fossil fuel, producing fewer emissions than coal. However, significantly greater amounts will need to be imported into South Africa as demand ramps up.
South Africa currently consumes some 185 bcf (billion cubic feet) of gas a year - 160 bcf of which is imported from Mozambique and 25 bcf is produced as part of Sasol operations at Secunda, with most of the molecules burnt for business and industrial purposes. However, Mozambique's Pande Temane gas reserves are scheduled to end by 2027.
In addition, gas has been identified as a potentially more environmentally-friendly fuel to generate baseload electricity as the country slowly transitions to cleaner energy sources and its coal-fired power stations become too old to operate.
Ideally located
The RBIDZ is a purpose-built industrial estate linked to the nearby deep-water port of Richards Bay. It offers specific incentives for investors and has been designed to cater for domestic and foreign direct investments for import and export-related industries and services.
The panel discussion was lively and comprised a number of seasoned stakeholders in the gas industry. Luvuyo Mkontwana, Transnet National Ports Authority (TNPA) GM Special Projects told delegates that TNPA will sign a Terminal Operator Agreement with a preferred bidder for the first LNG import terminal at the Port of Richards Bay this month. The first phase is scheduled to begin operations in 2028. The gas-to-power plant already planned at the RBIDZ is perfectly and cost-effectively located to provide anchor or bulk demand to make importing LNG financially viable, Shange said.
Steve Husbands, Head of Commercial: Oil & Gas Advisory, SLR, said he anticipates that some onshore LNG will be produced in the short term in South Africa, but gas-to-power plants will be required to provide the “anchor volumes” required to make the import of large quantities of gas commercially viable. He added that South Africa's demand for gas will continue to outstrip supply by a wide margin - and considering that building gas infrastructure is highly capital and time-intensive, the country essentially only has six months left to commit to essential gas infrastructure to replace the anticipated lost volumes.
Gas-to-power plants
Interviewed after the panel discussion, Shange said the RBIDZ is particularly pleased with the announcement by the TNPA to establish an LNG import terminal at the Port of Richards Bay. This is because the RBIDZ stands to benefit substantially from the imported gas. It is the site of plans by Eskom to establish a 3000 megawatt gas-to-power plant in terms of the 2019 Integrated Resource Plan, which is currently the subject of an environment related appeal.
In addition, a company called Power Group has successfully concluded an environmental impact assessment to establish a 2400 MW gas-to-power plant in the RBIDZ.
In December 2023, the Department of Mineral Resources and Energy issued its first IPP Bid window for Eskom to procure 2000 MW of power from gas, and submissions remain open.
Another potential anchor demand project for the imported gas is a R20 billion titanium dioxide pigment plant, for which the RBIDZ is currently building services and doing site clearance and geomatics work.
Shange said that this transformative project, which could employ up to 3000 people in the area, is currently banking on being supplied liquid petroleum gas (LPG) from the Bidvest Petredec LPG import terminal at Richards Bay. However, it could easily convert to LNG once it becomes available in Richards Bay.
Shange added that there are other good reasons why a gas-to-power plant would be well located in the RBIDZ. The Avon peaking power plant in Shakaskraal, located 122km from Richards Bay, currently operates at great cost to Eskom by burning diesel to generate electricity - but was specifically constructed to be able to convert to LNG.
Richards Bay itself is also home to a number of large industrial gas users, and there are also many big commercial gas users in the Durban south industrial zone, as well as in surrounding areas such as in Pietermaritzburg.
Shange told the conference delegates that energy projects such as the proposed gas-to-power plant should comply with a triangle of balanced principles: they must provide or contribute to energy security; they should be environmentally sustainable; and they should promote economic development for the communities around them.
“Regarding the economy in Richards Bay, there have been challenges in the past. The people of Richards Bay missed out on the coal transition and did not benefit materially from the large coal terminal in the port. They have also missed out on the renewable energy boom - there are zero large-scale renewable energy projects in KwaZulu-Natal. My feeling is that they are not willing to miss out on the gas transition," he elaborated.
Economic benefits
According to Shange, access to gas in KZN will bring many substantial economic benefits. The province is essentially only supplied electricity currently by one old power plant, Majuba in Mpumalanga. Commissioned in 1996, it has a capacity of 4 110 MW and is Eskom's second largest power station.
While additional gas imports would likely come from Mozambique in the medium-term to address the looming gas shortage in Gauteng, Shange said that the Port of Richards Bay gas import terminal and the gas-to-power plant at the RBIDZ will be the most efficient and cost-effective way to supply gas for the coastal commercial and industrial markets nearby, and for renewable energy supply to KZN in particular.
On the economic benefits, Shange was especially upbeat. “Just for starters, the site of the proposed land for the gas-to-power plant is owned by the community. There is also a wide range of associated projects and opportunities with the power plant and port gas terminal, such as inter-linking pipelines and connections, servitudes and other infrastructure and associated services.”
The RBIDZ provides its investors with a database of local community members with specific skill sets, as well as of local small and medium-sized businesses that may be required. Shange said the availability of additional power capacity will also spur further industrial and commercial investment in the region - something that has already been constrained in the past due to South Africa’s existing electricity challenges.
“For many years it was very quiet at the RBIDZ - but the energy transition is bringing many new opportunities - not only for the RBIDZ, but for the country as whole. We are attracting much interest from potential new investors and are very excited about the RBIDZ’s future prospects at present,” Shange concluded.