Natural gas an important part of SA’s energy future, minister says

Certainty in South Africa’s energy policy is vital for the country’s economic growth as it will stimulate much-needed investment. Speaking at the Gas to Power Africa Congress in Cape Town recently, Jeff Radebe, the minister of energy said that South Africa needs to grow and to attract significant infrastructure investment there needs to be policy certainty, especially energy policy.

Jeff Radebe, minister of energy

The minister said that he has committed to concluding the review of the Integrated Resource Plan (IRP), the country’s electricity plan, by mid-August 2018. The Integrated Energy Plan (IEP) and its the associated sector plans (IRP, Liquid Fuels Plan and the Gas Plan) will be developed and concluded by the end of the 2018/19 financial year, he said.

According the minister, natural gas represents a very important and growing part of the global energy system. It is the fastest growing fossil fuel and its consumption is forecast to increase by 1,4% annually, he said.

Global gas consumption is projected to increase from 124 trillion cubic feet (Tcf) in 2015 to 177 Tcf in 2040. This contributes the largest increase in world primary energy consumption.

Natural gas is finding its place at the heart of energy discussions worldwide. Recent discoveries of new supplies of gas, the remarkable speed and scale of shale gas development globally and decreasing gas prices has heightened the awareness of natural gas as a key component of energy supply mix in a carbon-constrained world economy.

There are abundant supplies of natural gas even in our neighbouring country, Mozambique, he said. Many of these supplies can be developed and produced at relatively low cost. The role of natural gas is expected to continue to expand, and its relative importance within the Southern African Development Community (SADC) is likely to increase further as greenhouse gas emissions are contained.

South Africa already has a 25 year gas trade cooperation agreement with Mozambique. This cooperation is guided by an interest in exploiting oil and gas opportunities within the region, as well as globally.

The Central Energy Fund (CEF), a state-owned company, is the South African Gas Infrastructure Company, executed through iGas, a subsidiary of CEF.

iGas acquired a 25% shareholding in a joint venture company, the Republic of Mozambique Pipeline Investments Company (ROMPCO) which owns and operates the 865 km gas transmission pipeline from the Mozambican gas fields of Pande and Temane to Secunda in South Africa.

The Mozambican partner, which also owns 25% shareholding in this joint venture, is the Mozambican government-owned company CMG, and a subsidiary of ENH. The third partner in ROMPCO is Sasol, which owns 50% shareholding.

The minister said that the South African government intends to expand this relationship with Mozambique to drive economic developments of previously excluded sectors of our society as it gives a practical meaning to socio-radical economic transformation.

It is important to note that Southern Africa has huge gas reserves in Tanzania, Mozambique and within South Africa in the form of coal bed methane and shale gas, he said.

South Africa’s gas market started to develop in the 1960s with the production of synthetic gas from coal used for the manufacturing of fuel and petrol chemicals in Sasolburg.

In 2004, the country started importing natural gas from Mozambique. South Africa has the possibility of introducing a variety of sources of natural gas which could be economically available within a 25 year planning horizon to 2040.

The realisation of potential natural gas reserves within SADC region, and especially the potential held with South Africa for indigenous gas (shale gas and coal-bed methane) represent a significant opportunity to boost economic growth, employment and investment. According to the US Energy Information Administration (EIA), South Africa has some of the largest potential shale resources in the world, beneath the Karoo. The EIA estimates the potential resource to be 380 Tcf, the minister said.

In our case, regional gas markets together with shale gas are a potentially commercially viable option. The environmental challenges of shale gas exploitation, research and regulation certainty will also contribute to the curved path of gas in South Africa.

According to the minister, the use of natural gas in South Africa has been largely limited to applications in the industrial (gas-to-liquids) and commercial markets. Natural gas accounts for 4% of energy consumption in the country.

In support of the vision for the South Africa gas programme, the Department of Energy has started developing, through its Independent Power Producer Office (IPPO), a Gas-to-Power IPP procurement programme. This programme, he said, will serve as an anchor for the gas market and infrastructure development in South Africa. The Department anticipates that the introduction of large-scale gas in South African economy will lower the country’s carbon emissions not just from electricity generation, but also from the energy sector as a whole, including the transport sector.

The minister said that the Department is in the process of reviewing the gas regulatory framework, Gas Act, 2001 (Act No. 48 of 2001). The review led to the development of the Draft Gas Amendment Bill, 2016. The Draft Gas Amendment Bill, 2016 is supportive and facilitative of investment in the Gas-to-Power IPP procurement programme value chain.

The Bill will largely introduce a mechanism that allows the Minister of Energy to direct the development of new gas infrastructure including pipelines, storage and regasification technology for imported Liquefied Natural Gas (LNG). The Bill will also encompass the midstream elements of the gas value chain, whereas the upstream will be covered under amendments to the Mineral and Petroleum Development Act, he said.

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