South Africa Sets Up LNG Import Unit for Gas-to-Power Program

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South Africa is creating a unit to import liquefied natural gas for power plants as suppliers including Cheniere Energy Inc. await fuel tenders for annual shipments of at least 3 million tons.

The Gas Industrialization Unit will initially focus on importing LNG as South Africa seeks to reduce its dependence on coal-fired power, Garth Strachan, a deputy-director general at the Department of Trade and Industry, said Monday in a presentation in Cape Town. Eventually, the unit will also seek to tap domestic sources of natural gas, he said.

“We’ve got to ensure that oil and gas industrialization has to be one of the pillars of industrialization going forward,” said Strachan.

Houston-based Cheniere is among companies interested in supplying South Africa’s gas-to-power program, which plans to add 3,126 megawatts of capacity between 2019 and 2025. That could require annual LNG imports of about $530 million, according to Trevor Sikorski, an analyst with Energy Aspects in London.

“Almost anyone with gas is looking for demand at the moment, but the most competitive supply” for South Africa would be from Nigeria, Angola, the U.S. and possibly Qatar, Sikorski said.

Mozambique Option

The new government unit, which requires final approval from the Energy Ministry, will consider regional gas supplies from Mozambique and Botswana, Strachan said. Mozambique’s state-owned Empresa Nacional de Hidrocarbonetos expects Anadarko Petroleum Corp. and Eni SpA to make final investment decisions on LNG export projects later this year.

South Africa also announced plans last week for legislation to clarify rules for the production and transportation of natural gas, paving the way for the development of shale-gas reserves in the country’s semi-desert Karoo region.

Source: Bloomberg