South Africa


Sasol, Central Energy Fund to open new ‘gas bridge’ to Mozambique

Sasol, Central Energy Fund to open new ‘gas bridge’ to Mozambique
Illustrative image | Sources: Energy Minister Gwede Mantashe. (Photo: Gallo Images / Jeffrey Abrahams) | The Sasol headquarters in Johannesburg, South Africa, on 12 April 2022. (Photo: Waldo Swiegers / Bloomberg via Getty Images) | Emissions rise from towers at the Sasol One site in Sasolburg, South Africa, on 7 August 2019. (Photo: Waldo Swiegers / Bloomberg via Getty Images) | Adobe Stock

Amidst an unprecedented load shedding crisis, the Central Energy Fund is pushing ahead with Energy Minister Gwede Mantashe’s plan to build a ‘gas bridge’ to Mozambique, while Eskom calls for up to 6,000 megawatts of new gas-fired power to urgently be added to the grid.

The announcement in March this year – that South Africa had secured a gas deal from Mozambique – went largely unnoticed: 

“The only thing I can confirm is that discussions… between our Minister of Mineral Resources and Mozambique are quite advanced,” Deputy President David Mabuza told members of Parliament in March. “[But] I can safely say that we’ve reached an agreement.”

It is no secret that Energy Minister Gwede Mantashe had been making regular visits to Mozambique with the hopes of securing a gas deal.


Two years ago, Saliem Fakir, executive director of the African Climate Foundation, warned that Mantashe was quietly building a “gas bridge” to Mozambique, starting with the 2,000 megawatt (MW) risk mitigation programme that looked designed to favour gas.

“[T]he ‘invisible hand’ of Gwede Mantashe slowly opening the gas tap… [I]f you put the pieces together, it is hard not to conclude that a gas strategy is taking shape,” he said.

Six months later, as Fakir predicted, the bulk of the risk mitigation programme was awarded to Karpowership’s gas-fired ships.

Now, following unprecedented levels of Stage 6 load shedding and calls for President Cyril Ramaphosa to declare an energy emergency, the “gas bridge” to Mozambique appears to be opening.

A state-owned gas trader

Last month, the state-owned Central Energy Fund (CEF) told amaBhungane that it was in the process of establishing a new gas trading entity, part-owned by CEF and part-owned by its counterpart in Mozambique, Empresa Nacional de Hidrocarbonetos (ENH). 

This state-owned gas trader will source gas, initially from Mozambique, and import it via the existing Rompco pipeline.

  • In February, CEF issued an urgent tender to establish a state-owned gas trading entity or aggregator to supply gas to projects around Coega in the Eastern Cape. That tender attracted attention from Gazprombank, part-owned by Russia’s state-owned gas supplier Gazprom. But since bids closed at the end of March, there have been no further announcements about the contract. CEF’s joint venture with ENH does not appear to have been the result of an open tender. CEF has also not applied to National Treasury for permission to form a joint venture, as it is required to do. For more, read: SA pursuing major gas deal — and Russia wants in

To begin with, the volume of gas imported by the state-owned gas trader will be modest: just two petajoules (PJ) of gas a year, compared to the 170 PJ a year that already flows to Sasol from the Pande and Temane gas fields in Mozambique.

The initial 2 PJ a year – valued at roughly R280-million – will be supplied by ENH. However, Sasol appears to have offered the state-owned gas trader a jumpstart.

As part of its strategy to move away from coal as a synthetic fuel feedstock, Sasol needs to secure an additional 40-60 PJ of gas by 2030. With volumes from the Pande and Temane fields in central Mozambique declining, Sasol’s most viable option is to import liquified natural gas (LNG) at Matola (Maputo) and feed it into the Rompco pipeline. 

“Sasol, ENH and CEF are currently concluding negotiations of a memorandum of cooperation to pursue importing additional gas to South Africa,” Sasol told us in a written response, while CEF described it as a “tripartite agreement”.

Sasol has provided cryptic and sometimes contradictory responses to our questions. Asked if it intended to import LNG from the state-owned gas trader, Sasol initially said: “That is correct.” But they later backtracked. 

For now, Sasol is continuing negotiations with an undisclosed LNG supplier alone: “Once the joint venture company is formally incorporated, the various negotiations and agreements are to be managed jointly with ENH and CEF,” Sasol said.

  • There has always been an intertwined relationship between Sasol and the South African government: until 1979, Sasol was a state-owned entity. Even today, the Government Employee Pension Fund and Industrial Development Corporation still owns a combined R60-billion (25%) stake of Sasol. And Sasol, CEF and ENH are already partners in the Rompco pipeline which transports gas from Mozambique to South Africa. Sasol told us that its potential partnership with the state-owned gas trader is “a continuation of this collaboration”.

It is unclear what benefit any of the parties will get from this structure. Normally, a gas trader would expect to earn a through-put fee or margin on all the gas it supplies, but Sasol stressed that the state-owned gas trader will not earn any fee or margin on Sasol’s gas. 

But, it said, “[t]here is benefit to all partners involved, as well as the governments of Mozambique and South Africa”.

A cynical appraisal suggests Sasol appears to be slowly divesting from the gas business, while encouraging government to bet big on gas – thus transferring to the state some of the risk of supply shocks and of stranded assets. 

CEF also declined to discuss any details, saying our questions were commercial in nature. 

Betting on gas

If the state-owned gas trader goes ahead, it will be Sasol’s second gas deal with government. At the end of June, Sasol completed the sale of 30% of the Republic of Mozambique Pipeline Investments Company – which owns the Rompco pipeline – to CEF and ENH subsidiaries for R5.1-billion.

With these two deals – the creation of a state-owned gas trader and the Rompco sale – Sasol is steadily transferring its investment in gas and associated risks to state-owned entities. Sasol will continue to use gas as it weans its Secunda operations off coal, but only for as long as it is profitable to do so.

In the short term, the financial risk to CEF is low as Rompco has been one of CEF’s few profitable assets. The far bigger risk is taken by South Africa Inc. 

Having state-owned entities heavily invested in the gas value chain creates an unwelcome incentive for government to use more gas than is economically or environmentally prudent. 

The more gas the country uses, the more money CEF and its subsidiaries make. And considering that PetroSA, the largest asset in the CEF group, is technically insolvent with liabilities exceeding assets by R7-billion, the temptation for government to put its foot on the gas is high.

  • CEF’s stake in Rompco and the new state-owned gas trader is housed in its subsidiary, iGas, but all CEF’s subsidiaries are in the process of merging to form the new National Petroleum Company.

A gas strategy

Expanding the use of gas is unashamedly part of CEF’s strategy. In its annual corporate plan, presented to Parliament in May, CEF laid out an ambitious growth trajectory that would see it triple its revenue from R12.8-billion in 2021/22 to R34.7-billion by 2025, driven by a “projected increase in production and sales in the oil and gas sectors”.

To do this, CEF is making investments in all parts of the oil and gas value chain: extracting, refining, trading and transporting. 

Aside from the Rompco deal and the creation of a state-owned gas trader, CEF has investments in upstream oil and gas exploration, including in Mozambique and South Sudan, and is in negotiations to buy the Durban Sapref oil refinery from Shell and BP. 

In the long-term, CEF wants to expand into electricity generation.

CEF’s strategy is closely aligned with that of its shareholder, the department of mineral resources and energy (DMRE) and its minister, Gwede Mantashe. 

On Friday, Ramaphosa disclosed that the ANC was considering a proposal, floated by Mantashe, to establish a second state-owned power utility to compete with Eskom. 

“It’s an idea that we have been throwing around for the past two years, but it’s the first time I get it catching fire,” Mantashe told the Sunday Times.

“[W]hat we are suggesting — it’s not a decision yet — is let’s have a second generation company of the state and that generation company must focus on baseload and there must be a build programme for power stations.”

CEF, with its growing interests in gas, increasingly looks like it could be part of that play.

Karpowership… only bigger

At the heart of the DMRE’s masterplan for the gas industry is the belief that the electricity sector should provide the initial demand for gas in South Africa.

“A challenge in developing the gas sector is to bring gas demand and supply on stream at the same time… One way of breaking this impasse is to create significant ‘anchor’ gas demand through the development of a gas-to-power programme,” the preliminary basecase report, published by the DMRE in December, reads.

How much gas South Africa’s electricity sector needs is the subject of increasingly bitter debate. Amongst energy analysts, the consensus is that the country likely needs a small amount of gas, or an alternative fuel, to play a balancing role in the next three decades as 100,000 MW of cheaper renewables come online. 

But with 2022 delivering record-breaking rolling blackouts, Eskom has signalled that it is considering using gas on a larger scale. 

In June, chief executive Andre de Ruyter said Eskom needs 3,000-6,000 MW of new gas power. That appears to be in addition to the 3,000 MW of gas power the independent power producer programme plans to start procuring in October.

“The Medium-Term System Adequacy Outlook” – Eskom’s annual projection of energy supply versus demand – “indicates a base-load gap in demand and supply of up to 5,000 MW in 2026,” Eskom explained in a follow-up email.

The debate is not actually how many gas turbines we install, but how many hours we keep them burning. The problem with the notorious Karpowership projects was that they would burn gas for a minimum of 12 hours a day, thereby not only replacing more expensive diesel, but crowding out cheaper options like coal and renewables.

Eskom said it had modelled the country’s anticipated energy demand up to 2030. 

“Modelling indicates an anticipated annual shortage of up to 60 terawatt-hours (TWh); this against a requirement of ±315 TWh. We therefore do not just have a demand (MW) problem – there is also a significant energy shortfall.”

It added: “[T]he current energy gap is significant and we urgently need base-load capacity towards 2030… This gap can be filled with gas generation, and specifically mid-merit, to complement the increasing renewable roll-out, and is urgently required, not in the future, but now.”

Eskom is not alone in its assessment that we urgently need to add more electricity to the grid. Energy analysts were sounding the alarm, even before the country was plunged into Stage 6 rolling blackouts. But few believe that large-scale gas – which is expensive and still a fossil fuel – is a good idea.

The example Eskom gave us was that a 3,000 MW combined cycle gas turbine, running for 11.5 hours a day, would generate 12.6 TWh of electricity a year, which would go some way towards closing the supply gap.

  • Big gas comes with a big price tag: A 3,000 MW combined cycle gas turbine plant would cost roughly R70-billion to build, and at a 48% capacity factor (11.5 hours) would burn through around R10-billion of gas a year, likely for the next 20 years as gas infrastructure needs long-term contracts to recover its costs. Eskom said additional modelling was needed to figure out how heavily it would lean on gas.

In short, what Eskom is considering is another Karpowership – only bigger.

The Komati gas experiment

Last month, Eskom embarked on an information-gathering exercise to work out what it would cost to deliver gas to Komati power station outside Middelburg for a smaller 500 MW peaking plant and a 750 MW mid-merit plant.

Komati will be shut down in September this year and repurposed for solar and potentially gas. The Rompco pipeline passes within a few kilometres of the power station, making it a viable testing ground for a grand gas-to-power experiment. 

Based on the request for information, these gas turbines would start operating in May 2025 and run for between one and 11.5 hours a day on average, burning roughly 22 PJ of gas (valued at R3-billion) a year.

During one of his working trips to Mozambique last year, Mantashe told journalists: “We are deactivating coal-fired power plants and have taken a concrete decision to replace these plants with gas technology, and that will increase the amount of gas we expect Mozambique to supply us with… This is an opportunity for Mozambique to seize.” 

As recently as May, Eskom said gas-to-power at Komati was “not cost competitive at this stage”. But despite global gas prices rising, Eskom now appears to be revisiting this assumption, saying the prices provided would feed into a feasibility study on the gas-to-power opportunity at Komati.

“This is a clear signal that fuel switching from coal-fired power at existing sites, to gas-fired power is now nearing reality,” a recent Standard Bank presentation concluded.

“We expect additional coal-fired power stations (Grootvlei, Hendrina, Camden) within close reach of the existing Rompco gas pipeline to also possibly fuel a switch to gas-fired generation in time.”

Converting dying coal power plants to run off gas would generate demand for an additional 70 PJ a year, according to Standard Bank, which is good news for Rompco, good news for the state-owned gas trader and good news for their government shareholders.

It would, however, be bad news for everyone else. 

Generating electricity from gas is only marginally better – in price and environmental impact – than burning diesel. And while a small amount of gas for balancing power has virtues, running gas turbines for 12 hours a day is what UN secretary-general António Guterres has described as “moral and economic madness”.

However, none of these projects will be feasible without access to affordable LNG. Which is perhaps why government’s push for gas appears to be breathing new life into domestic gas projects thought to be dead and buried. 

Last week, Searcher Seismic said it would reapply for permission to conduct seismic surveys off the West Coast after its previous ocean survey was blocked by activists and communities who applied to the Western Cape High Court. 

Meanwhile, the department of water and sanitation kicked off a first round of public hearings in the small town of Theunissen in the Free State on “using water for unconventional gas activities” – unconventional gas is industry shorthand for fracking.

The declaration of an “energy emergency” could also play into the hands of Karpowership: its three projects, with a combined 1,120 MW of gas-fired power, were stopped after they were denied environmental authorisation from the department of forestry, fisheries and the environment (DFFE).

But section 30a of the National Environmental Management Act contains a get-out-of-jail-free card: in an emergency, companies can apply for an exemption from these stringent environmental permits. 

In June 2020, Karpowership tried to use this tactic by claiming that its floating gas-fired powerships were needed to tackle the Covid-19 pandemic. An exemption was initially granted, then withdrawn and investigated after DFFE concluded that “there was in fact no emergency situation”.   

That would be harder to sustain if Ramaphosa declares an actual “energy emergency”. 

As seasoned energy commentator Hilary Joffe warned this week, be careful what you wish for. DM

amaBhungane is a nonprofit centre for investigative journalism. We co-publish our investigations, which are free to access, to news sites like Daily Maverick. For more, visit us on


Comments - Please in order to comment.

  • Harro von Blottnitz says:

    Excellent analysis – few journalists masters energy ‘quants’ correctly! Tricky debate what we ‘should’ do. Somewhat missing is an analysis of what we (SA Inc.) are actually capable of doing. Other than at Sasol, we have very limited engineering expertise with gas.

  • Carsten Rasch says:

    The only thing i wish for us to be rid of this clown school once and for all.

  • R S says:

    I do and don’t understand govts obsession with fossil fuels. We have a perfect case study in Vietnam in what you can achieve with renewables.

  • Peter Dexter says:

    I’m pretty sure this is largely designed to enrich the usual connected cadres, with electricity generation as a secondary consideration

  • Rob Wilson says:

    A good read. At some stage (like 10 years ago) we are going to have to stop sitting on the fence and commit to a course of action. Gas, nuclear and coal are mature technologies at this level, unlike solar and wind which are dependent on battery technology which is not mature. Lets get on with it.

  • Johan Buys says:

    well, I think they should taper down their forecast grid energy demand. Anybody that can is going huge solar with own smart grid. Talking about factory scale, not rich households. If our demand is 30GW now it will be 25GW by 2027. After the last few weeks, nobody with a brain cel is putting their business at risk of the government fixing Eskom. It has nothing to do with transitioning to a green energy future : pure math says if your business is mainly 7AM to 7PM and you have the roof space you should be doing enormous solar and storage. At stage 6 my diesel bill would be around R350,000 per month on one 300kVA demand transformer. That bankrupts the business, same as not operating during loadshed bankrupts the business.
    This gas thing is just another scam. Our energy prices are regulated. So no matter what price Mantashe’s wife and Sasol buy their gas at, we will not experience a penny of relief. Gas at current prices is not competitive, probably 2.5 times what solar plus storage is.

  • virginia crawford says:

    No worries about the insurgents that attacked Total, then. I suppose a state owned gas trader and the associated trough are just too tempting.

  • Easy Does It says:

    My concern is the stability of Mozambique and even more, the dirty fingers o the ANC in the pot. They need the money more than ever. Another Chncellor House project?

  • Sheda Habib says:

    This gas bridge was promised 10 years ago.

  • Roelf Pretorius says:

    Well, first of all it should be clear to all of us that SA has a shortage of electricity production, which is only going to get worse as the demand grows together with economic growth. And gas is not just a cleaner option than coal, but as I understand it, much of the reliability problems at Eskom actually centres around bad quality coal that is not compatible with the equipment of the new power stations. Which is more, a gas turbine is very quick to start up, so it is eminently suitable for back-up power generation during peak times. But this is only OK as long as it is structured to be for the medium term – even if gas replaces coal gradually, gas will have to be mostly replaced by greener energy on the long term. But I would like us to invest in another balancing power station like Ingula also – eventually that is the ideal way to store big amounts of energy without any risk for the environment, and then the excess energy from sun during the day, and wind when the wind blows strong, can be stored & then recovered when it does not. A gas turbine station (as the one that Sasol already has in Secunda) can then serve as a last resorts back-up when things go wrong.

Please peer review 3 community comments before your comment can be posted


This article is free to read.

Sign up for free or sign in to continue reading.

Unlike our competitors, we don’t force you to pay to read the news but we do need your email address to make your experience better.

Nearly there! Create a password to finish signing up with us:

Please enter your password or get a sign in link if you’ve forgotten

Open Sesame! Thanks for signing up.

We would like our readers to start paying for Daily Maverick...

…but we are not going to force you to. Over 10 million users come to us each month for the news. We have not put it behind a paywall because the truth should not be a luxury.

Instead we ask our readers who can afford to contribute, even a small amount each month, to do so.

If you appreciate it and want to see us keep going then please consider contributing whatever you can.

Support Daily Maverick→
Payment options