South Africa’s gas master plan needs "substantive reworking", says energy minister

South Africa’s Electricity and Energy Minister Kgosientsho Ramokgopa has said the country’s gas master plan (GMP) needs to be reworked. According to the minister, the draft GMP contains “major deficits”, News24 reports.

In a regular media update on matters concerning his portfolio on Monday (August 12), Ramokgopa spoke about the draft GMP, which was issued earlier this year for public comment.

Based on the submissions received, the minister noted, the plan needed “substantive reworking”. This did not mean redrafting it from a clean slate, but rather incorporating the points raised in the public comment process, he said.

Among the issues raised by the business community is the upcoming gas supply cliff which, according to Ramokgopa, is currently being urgently addressed. The warnings about the looming crisis have been coming from analysts and industry leaders for some time now.

Gas shortages would impact businesses that employ 70,000 people and generate ZAR500bn ($27.3mn) for the economy each year, Business Leadership South Africa’s (BLSA) CEO Busisiwe Mavuso warned in May 2024.

According to Prashaen Reddy, a partner at management consulting firm Kearney, there are few substitutes readily and economically available for gas in energy-intensive industries. “Hence industrialisation may further decline should no gas solution be found in the years ahead,” Reddy was quoted by News24 as saying.

Ramokgopa acknowledged the crisis, stating that the government was taking steps to address the gas supply deficit. “We are now proceeding and looking at LNG [liquefied natural gas] solutions,” the minister said.

The quickest solution would be to use the existing Rompco pipeline to get gas supply from Mozambique, Ramokgopa said, adding that work was underway and more would be revealed at a later stage.

The minister tried to reassure industry leaders that the matter was being resolved with urgency. However, many industrial gas users believe that valuable time has been lost and the crisis should have been resolved “yesterday.”

“We accept that,” Ramokgopa said as cited by News24. “But we will do everything possible to address this. As soon as we have found that solution, I am confident we will find that interim solution soon.”

In the meantime, 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, as reported by Newsbase.

One of the other matters addressed in Ramokgopa’s update was the volume of offtake, which must be significant enough to underpin a gas-to-power programme. According to the government, South Africa could opt for an annual offtake greater than 180 petajoules. Ramokgopa said the number could go up to about 300 petajoules.

“We know that there is a relationship between volume and the cost of the molecule, and that is the number we want to resolve for,” the minister was quoted as saying.

Regarding costs, one of the key considerations is whether they should be denominated in rand, as this could introduce currency risks affecting pricing. Ramokgopa emphasised that discussions about costs, which are part of a government-to-government agreement, must take these risks into account, ensuring that the financial burden is not transferred to consumers.

He also noted that importing LNG would be about three times more expensive than using natural gas, writes News24.

During the media update, Ramokgopa also spoke about the ongoing power generation crisis and the government’s achievements in ending crippling power outages.

According to the minister, numbers indicate the country is “within touching distance” of the end of scheduled power cuts, known locally as load shedding.

South Africa has seen 138 load shedding-free days this year, most of which occurred in winter, owing to the improving performance of its coal-fired power stations, which the country relies on for up to 85% of its electricity supply. The summer outlook will be released by the state-owned power utility Eskom in a few weeks, Ramokgopa said.

Eskom was also relying less on open-cycle gas turbines (OCGTs) that run on diesel, the mister pointed out, adding that these plants were being used as intended, during periods of peak demand. This resulted in a considerable saving on diesel expenditure - nearly ZAR10bn during the period between April 1 and August 7, 2024.

Ramokgopa reaffirmed the country's commitment to a fair transition toward a low-carbon economy, guided by the Just Energy Transition Investment Plan (JET-IP) for 2023-2027. He pointed out that the financial support available through the JET Pact with wealthier nations has not been fully utilised, says News24.

To achieve its climate goals while ensuring the protection of workers and communities, South Africa requires an investment of ZAR1.5 trillion.

“It is a huge ticket, we know the fiscus won't be able to carry that, so it is important that we look at bespoke financing instruments to support this,” the minister said.