Gas in South Africa: How Viable is it?

Introduction

Liquefied natural gas (LNG) is increasingly recognized as one of the cleanest fossil fuels available, serving as a vital energy source for peaking plants globally, providing quick electricity boosts. It has also been identified as a potential alternative to coal in aging power stations. To explore the prospects of LNG in South Africa, Energize spoke with Aldworth Mbalati, founder and CEO of DNG Energy, which is establishing a bunkering service at the Port of Coega.

The Focus on LNG

Why LNG?

LNG is a cleaner and more affordable energy option, crucial for transitioning to a net-zero future. The gas-to-power sector is especially important in South Africa, where energy shortages have hampered economic growth. While strides have been made in integrating renewable energy, gas provides necessary baseload capacity, ensuring reliable energy availability. As older coal plants are decommissioned, quick and safe deployment of gas technologies will be essential.

Coega Bunkering Facility

Project Timeline

Preparations for DNG’s bunkering operations in Coega are progressing, with discussions ongoing with partners for acquiring vessels and infrastructure. The company aims to deliver its first LNG by September 2021.

Storage Capacity

The facility is planned to initially store 38 million GJ of LNG.

Building the Bunkering Facility

Operational Details

DNG’s bunkering operations will involve utilizing bunkering vessels to receive, store, transfer, and regasify LNG. The process requires regulatory approvals from various authorities, including Transnet National Ports Authority (TNPA) and the National Energy Regulator of South Africa (Nersa). A floating storage unit (FSU) will be moored at Coega, facilitating ship-to-ship transfers.

Project Costs

The bunkering facility is expected to cost approximately USD 150 million.

Affordability of LNG

DNG anticipates being able to deliver LNG affordably, as the necessary infrastructure will support multiple projects, spreading costs effectively.

Demand for Gas-to-Power

LNG is viewed as a cost-effective alternative to diesel for peak power generation. The conversion of open cycle gas turbines to primarily use LNG is underway, with completion expected by mid-2022.

Impact on Electricity Costs

Integrating LNG into the energy mix is projected to relieve some cost pressures for consumers, particularly those off the grid. It will be a significant contributor to a more efficient energy landscape.

Industrial Use of LNG

LNG will be available for various industrial applications, including power generation and processes in logistics and mining. This positions gas-to-power as a major player in the national grid.

Marine Sector Demand

The marine sector is rapidly adopting LNG, driven by stricter emissions regulations. Currently, approximately 3 million tonnes per annum (MTPA) of LNG is consumed, with projections suggesting this could rise to 8–10 MTPA by 2025 and 35–40 MTPA by 2040. DNG aims to be a key player in the marine bunkering market, leveraging its strategic location along major trade routes.

Conclusion

DNG Energy’s initiatives in LNG are poised to make a significant impact on South Africa’s energy landscape. With its focus on providing a cleaner, reliable, and affordable energy source, LNG is positioned to play a vital role in addressing the country’s energy challenges while supporting economic growth and sustainability.