The National Treasury last week said the move would lead to R64 billion of investments in port, pipeline, generation and transmission infrastructure in Richards Bay, Coega and Saldanha Bay.
Building on the momentum and success of the renewable energy Independent Power Producer (IPP) programme, the mooted gas programme will see more private capital injected in the electricity sector.
The Treasury said the Department of Energy was developing a gas utililisation plan, which would take a 30-year view of the gas industry from a regulatory, economic and social perspective.
Chris Bredenhann, PwC Africa oil & gas advisory lead, said the gas-to-power programme was aligned with the country’s integrated resource plan and the government’s stated intention to reduce our carbon footprint, increase the share of natural gas in the energy mix and encourage the development of a natural gas industry in South Africa.
“The gas IPP programme is also an important element of our energy mix, as it provides an opportunity to create generation capacity in a very short time frame – it does not require the long lead times and construction periods associated with large-scale generation projects like big coal or nuclear builds,” Bredenhann said.
As the government prepares to launch the gas-to-power programme, comparisons will be made with the successful IPP programme for renewable energy, through which the government procured 6 377MW of electricity from the private sector since the programme’s launch in 2009.
Approximately 2 045MW of the procured electricity capacity is connected to the national electricity system.
“There is significant interest in the gas IPP programme from project developers, both large and small. This was demonstrated by the large number of responses submitted to the Department of Energy on the request for information that was issued mid-2015,” Bredenhann said.
“The gas IPP programme is however more complex than the renewable energy programme, as it is exposed to a number of additional components and risks. These include gas supply, receiving and regassification infrastructure, transmission and distribution infrastructure, supply risk, price risk and foreign exchange risk,” he said.
Such matters would be addressed in a request for qualifications that would be issued during the course of this year, which would provide the procurement framework against which developers would be required to bid, he said.
“The success of the programme will therefore depend on the design of the procurement programme and the evaluation of the bids received,” Bredenhann said. There were several potential gas sources, “but the initial gas will be in the form of imported liquefied natural gas. Domestic shale gas and coal-bed methane are future options that may be explored, as are potential offshore gas developments and piped gas from Mozambique,” he said.