The development of liquefied natural gas (LNG) could help transform the South African economy, spur re-industrialisation, reduce the country’s over-reliance on coal-fired power stations, and contribute to increased regional trade.



South Africa has in recent years run into electricity shortages, forcing the country’s utility to&nbsp;burn expensive diesel&nbsp;to keep the lights on. A major polluter, the country also relies on coal to generate almost 90% of electricity. 



On top of this, South Africa has&nbsp;lost&nbsp;its manufacturing competitive edge, which was built on relatively cheap electricity and behind protective trade walls. Electricity prices have increased substantially over the past decade to pay for the power utility Eskom’s two new coal-fired power stations.



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Liquefied natural gas could change South Africa’s fortunes. And government recognises this. Policy developments in recent years have factored in an increasingly greater role for liquefied natural gas in the country’s energy mix and the overall economy, both as a clean alternative energy source and as a spur to industrial development.



The&nbsp;southern African region, specifically Mozambique which already has a pipeline to South Africa, could be the major supplier of gas to South Africa.



In my recent&nbsp;research&nbsp;I argue that to develop a liquefied natural gas sector South Africa could re-purpose existing institutions, namely those relating to the country’s established liquid fuels industry.



The research traced the evolution of gas developments in the country from 1998 to 2018. It found a close interaction between the electric and the liquid fuels sectors. At present gas contributes about 3% to the country’s primary energy mix, but there are indications that it will feature more prominently over the next decade.



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There are&nbsp;number of reasons&nbsp;for pursuing gas. They include:



<ul><li>energy diversification and security to reduce the country’s dependence on coal for electricity;</li><li>reduction of Green House Gas emissions;</li><li>provision of flexibility to the introduction of renewable generation into the electricity grid; and</li><li>facilitating the development of provincial industrial hubs and regional trade within the Southern African Development Community.</li></ul>



<h4 class="wp-block-heading">Three phases of gas development</h4>



South Africa’s history with gas can be delineated into three periods. Firstly, from 1998-2005, South Africa significantly reformed its energy sector. This included the&nbsp;1998&nbsp;white paper on energy, which recognised natural gas as an option to diversify the country’s energy mix. In 2001 the&nbsp;Gas Act&nbsp;was implemented, facilitating the development of gas infrastructure in the country through pipelines and the regulatory framework.



Significantly, in 2004, a pipeline between Mozambique and South Africa began pumping gas. Sasol, a dominant player in the country’s liquid fuels industry, was behind the 865 km gas pipeline. While the majority of gas transported through the pipeline goes to Sasol, the pipeline has nonetheless created demand to around 370 industrial and commercial customers via 530 off-take points.



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The second phase covers 2006 &#8211; 2012. This is when gas started to feature more strongly in South Africa’s energy policy. A few turning points occurred. One was the substantial&nbsp;shale gas potential&nbsp;reported by the United States energy information agency. This encouraged policy makers to include gas into the energy mix. Second, natural gas discoveries in&nbsp;Mozambique&nbsp;and Tanzania raised the potential for regional trade.



Thirdly, South Africa experienced an electricity crisis, culminating in blackouts in 2008. In response, the state power utility Eskom turned to the costly diesel&nbsp;Open Cycle Gas Turbines. But this was hugely expensive and Eskom burnt through its operating budgets to ensure a steady supply of electricity.



<h4 class="wp-block-heading">Global trends: the main driver</h4>



During the third phase, from 2013 to 2018, gas development started to gain momentum driven by major global trends. These include the trend toward&nbsp;liquefaction of gas&nbsp;which enabled transportation of gas to places where pipelines weren’t possible.



Secondly, gas prices began changing from long-term to short-term contracts. This opened up the trading of gas to a competitive, spot market. As a result, new buyers have been attracted into the sector.



Thus, by 2015, the Department of Energy had announced the Gas Independent Power Producers Procurement Programme (Gas I4P) with a procurement of 3.7 GW electricity generation.



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By August 2018 the country’s draft integrated resources plan had gas playing a significant role in future electricity generation. The indications were that gas would contribute as much as 15% of the installed capacity&nbsp;mix by 2030. This seems to suggest that energy policy makers believe gas to power has the necessary fit, form and compatibility with the electricity system.



Another factor that’s driven interest in gas is the belief that it could be the country’s next commodity resource, as the country’s mining future is in decline. Some actors in the oil and gas community are pushing for the country’s mining skills to be used in the gas sector. This is informed by the view that the exploration and drilling skills used in the gas fields are similar to those used in mining.



<h4 class="wp-block-heading">The future</h4>



South Africa’s existing institutional infrastructure can be used to develop the liquefied natural gas industry. That won’t be an easy task. There are major efforts required to amend the Gas Act, the Ports Act, Mineral and Petroleum Resources Development Act, and the Electricity Regulations Act, in order to accommodate the LNG initiative.



Gas can also play an important role in the restructuring of the electricity system. As there are trend towards transactive energy, where utilities moves towards customer centric demand, in that grids become less passive and deterministic, and more active and stochastic. Here gas could play a crucial role, as it has features which are flexible and modular enabling a decentralised system. Lastly, there are opportunities for gas as potential feed-stock in industrial processes, which requires strategic reassessment of existing industries.



-Marie Blanche Ting; Doctoral researcher, University of Sussex



-The Conversation 



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How Liquefied Natural Gas Could Change South Africa’s Fortunes

Shell applied for gas exploration rights for an area covering 90,000 km2—the size of KwaZulu-Natal. Falcon Oil and Gas applied for an area of 30,000km2—one-and-a-half times the size of the Kruger National Park—which encompasses Jansenville, the mohair capital. Sunset Energy applied for 35,000km2 around Graaff-Reinet. Besides these, there are many more; together they cover an area the size of the Eastern Cape Province. It could be the world’s fifth largest shale gas find.
<div id="attachment_728" style="width: 210px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-728" class="wp-image-728 size-medium" src="/wp-content/uploads/2017/04/JWE-Head-Shoulders-3-200x300.jpg" alt="" width="200" height="300" />Jan Willem Eggink</div>
According to Jansenville, Sasol is not pursuing further exploration, after initial studies of the Karoo “did not reveal particularly strong prospects”, although it remains interested in the venture. “[It] supports the current moratorium on additional license applications” which allows the government “to define the robust and world-class regulatory environment that is critical for the responsible functioning of shale gas exploration and operations”. Sasol was awarded a technical co-operation permit of 82,145km2 offshore Kwazulu-Natal and might apply for exploration rights after the year-long study period.
Econometrix, South Africa’s largest independent macro-economic consulting firm, reports: “Just 10% of the US Energy Information Administration (EIA) estimated 485 tcf (trillion cubic feet) shale resource could add R200 billion ($24 billion) to GDP annually and create 700,000 sustainable jobs.”
Jan Willem Eggink, general manager upstream of Shell, says: “The hundreds of thousands of jobs are only generated if we are producing the gas and it goes into the market where new industry will start. The exploration phase will not generate a very high number of jobs because the skills are not yet here. We will have two rigs: each rig will have 50 to 100 people, possibly slightly more; it depends on the rig.”
PASA believes that only 10% of the estimated reserve is viable for exploitation. Eggink believes that Econometrix’s case studies on 4% and 10% of the gas reserves are “conservative cases”.
“The bottom line is we have to drill wells to actually find out whether the shale [is] there and can be productive,” says Eggink.
South Africa imports 65% of its natural gas from Mozambique. This could be the solution to the country’s dependence on foreign energy.
“The National Planning Commission (NPC), headed up by Trevor Manuel, outlines the challenges for South Africa which are inequality, poverty, unemployment, education and energy. I think these have to be resolved in the foreseeable future. If not resolved, I think there is a huge problem for South Africa. This project provides an opportunity to address many of these issues listed in the NPC report,” says Eggink.
“If you have sufficient energy in a country, then industries will build, employment will rise appropriately and through that, education will also get a boost because if you have significant employment opportunities these people need to be educated.”
Shell has conducted public participation meetings in the Karoo and Cape Town, he says.
“The Environmental Management Plan (EMP) we submitted has the most extensive consultation any project has had in South Africa so far. We had, I don’t know, 6,000 questions which we have all answered individually. They are published on the Golder Associates website, which is an independent entity.
“With regard to environmental impact, the footprint of the development will be very small. First of all, we will explore, and we will explore up to 24 wells in accordance with the EMP in our area. These drilling rigs will end up on a football pitch-sized area. After that we may go into development, and nowadays, on this football pitch-sized areas [you can place] up to 32 wells. One development could be between 1,000 and 2,000 wells which would mean, with these horizontal wells, that you would need 60 or 70 of these football pitch-sized areas, four to five kilometres from each other. That is one development.
“That will be a pretty small area, compared to our license area. We will be operating in 1% of the area for development, and at surface the impact will be significantly smaller than that 1%.” FORBES AFRICA calculates it to be 900km2.
When it comes to water contamination by fracking fluids and gas, Eggink quotes the April 2012 report on The Environmental Impacts of Shale Gas and Shale Oil Extraction Activities, by the Committee of the Environmental, Public Health and Food Safety of the EU.
“It is important to note that no official or other reputable sources have demonstrated any systematic [connection] between shale gas and shale oil extraction and human and animal health. No official or other reputable sources worldwide have demonstrated any cases where hydraulic fracturing has led to contamination of drinking water.”
Eggink quotes one case, which is currently being disputed, in Wyoming. It relates to the poor quality of wells, which he assures will not be the case with Shell as it adheres to high operating standards.
All the chemicals to be used will be disclosed on Shell’s website. Eggink claims that from a list of a few hundred possible chemicals, only 8 to 10—on occasion slightly more—are used, depending on the rock mechanics of the site to be drilled.
According to Econometrix: “At depths of 4,000 to 5,000m below the surface where the shale deposits are expected to be found, any water in the vicinity or between the surface and those depths is likely to have been rendered unusable through natural contamination with arsenic and uranium.”
Chapter 10 of Shell’s EMP outlines its commitments to ensure minimum environmental impact and adhere to safety regulations. The most salient points include: full compensation to landowners with proven direct negative impact or loss due to their activities. Shell won’t compete with locals for water and will monitor water quality through an independent party. It will employ local experts to identify the most suitable water source for development areas. Shell promises to recycle flowback water and responsibly dispose of remaining fluids. It promises that permanently plugged and abandoned wells will adhere to the highest international practices.

Tag: Sasol

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How Liquefied Natural Gas Could Change South Africa’s Fortunes

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