GasCo set to stabilise natural gas supply for South African industry

The Industrial Gas Users Association of Southern Africa (IGUA-SA) has issued a stark warning about South Africa’s natural gas reserves, which could be depleted by 2026. To ensure continued gas supply, IGUA-SA has established the externally funded aggregator company GasCo, Independent Online (IOL) reported on July 12.

Gas aggregators are usually state-owned or state-operated entities (SOEs). However, owing to the lack of a state-coordinated mechanism in South Africa, the industry has been prompted to establish this model privately and on a non-profit basis.

For over a decade, the South African gas industry has heavily relied on the natural and methane-rich gas supplied by Sasol, a global integrated chemical and energy company.

In August 2023, the NYSE- and JSE-listed Sasol announced that it would cease gas supply to industrial areas and consumers by June 2026. This decision will significantly impact South African industries that operate using natural gas, writes IOL.

“Gas-energy security is a critical enabler of South African economic development,” said IGUA-SA CEO Jaco Human. “Sasol’s unilateral decision to cut off gas supply poses an existential risk to large industrial users of gas and is likely to lead to the deindustrialisation of the South African economy.”

The IGUA-SA is a non-profit organisation consisting of members from a large sector of the manufacturing industry that relies on gas for its operations. The natural gas industry employs approximately 70,000 people and contributes ZAR300bn – ZAR500bn ($16.5bn – $27.4bn) a year to the South African economy. IGUA-SA data show that the current demand for gas is almost double that of the supply.

According to IGUA-SA, GasCo will operate from a low asset operational base with full transparency, and it will be able to secure better rates and potentially stabilise gas supply and costs.

“Gas aggregation paves the way for a more mature, transparent and equitable gas market in South Africa,” Human said as quoted by IOL. “We anticipate that GasCo would be a platform to enable inclusive, effective, long-term participation alongside the government, Sasol, international oil companies, gas suppliers and transporters, and financial institutions, all of whom would play a critical role in the process moving forward.”

By taking the first step towards establishing GasCo, IGUA-SA predicts that the gas industry will grow and become more stable in Southern Africa. However, according to Human, long-term, constructive collaboration remains critical for the development of associated markets.

“We continue to actively engage with all stakeholders with the ultimate goal of enhancing South Africa's industrial and manufacturing capacity, economic development, and ability to create and sustain employment,” he says.