Business Maverick

ENERGY ALERT

SA has ‘four months’ to avoid a natural gas Day Zero as Sasol contract supply crisis looms

SA has ‘four months’ to avoid a natural gas Day Zero as Sasol contract supply crisis looms
(Photo: Waldo Swiegers / Bloomberg via Getty Images)

Sasol will stop supplying natural gas from Mozambique when its contract with the country ends in June 2026. The halt of gas supplies to South Africa will have dire consequences for the economy and job security in the country.

Industrial gas users said South Africa’s government is not heeding its repeated warnings about the worst-case scenario in which the country runs out of natural gas by June 2026, when petrochemicals manufacturer Sasol will stop supplying the resource from Mozambique.

The gas users have also accused the government of not moving fast enough to resolve the looming crisis. 

The halt of gas supplies to South Africa will have dire consequences as the resource is estimated to support as many as 70,000 jobs and contributes up to R500-billion a year to the domestic economy. 

Gas is used by industries including steel, chemicals, glass, food and others in Gauteng, Free State, KwaZulu-Natal and Mpumalanga.

A Day Zero — a situation in which South Africa runs out of gas — will also impact individuals and businesses, said the Industrial Gas Users’ Association of Southern Africa (Igua-SA), which represents industrial gas users such as Consol Glass, Illovo, Nampak, Mondi, ArcelorMittal, South32, South African Breweries and Coca-Cola. These companies depend on uninterrupted gas supplies for their operations. 

Igua-SA said some 400 smaller to medium-sized businesses, several hospitals and roughly 8,000 households will also be directly impacted by the disruption in gas supplies. 

Jaco Human, executive director of Igua-SA, said businesses will be forced to switch to fuels “which are more expensive and more environmentally damaging, with repercussions for consumer pricing and carbon emissions”.

Warnings 

Igua-SA had been warning the government about the looming gas shortages for at least six years, to no avail.

Although Sasol’s contract with Mozambique’s government ends in 2026, Human said South Africa has only four months to put in place measures to ensure gas supplies are not disrupted. 

Although 2026 may seem relatively far off, gas pipelines and other infrastructure will have to be built and commissioned in the coming months so that the flow of gas begins to yield benefits.

“We are sitting with a supply-demand deficit. No gas infrastructure developments have been built for many years. There are dwindling gas supplies from Sasol. 

“Despite continuous engagements, we have not seen any movement from the government on investments and policy direction to address the problem,” said Human during a media briefing on Tuesday. 

Sasol is considered to have a monopoly on the supply of natural gas to users in KwaZulu-Natal, Mpumalanga and Gauteng. 

In the early 2000s, Sasol entered into a contract with the governments of Mozambique and South Africa to explore the Pande and Temane gas fields. 

Sasol sources gas from these fields and transports it via the Republic of Mozambique Pipeline Investments Company (Rompco) pipeline. 

The company also supplies gas from its plant in Secunda to KwaZulu-Natal and Mpumalanga via the Lilly and SWM pipelines.

In August 2023, Sasol informed the industry that its supply of gas would be suspended by June 2026 because the gas fields were drying up. 

Human said there were no confirmed supply solutions that would come on-stream early enough to act as a sufficient source of independent supply.

Although there are major gas developments underway in Namibia and other parts of Mozambique, it will take time to secure offtake and supply agreements with these countries to avoid a Day Zero scenario. 

There are also infrastructure limitations as infrastructure needs to be expanded to link gas from Namibia and other parts of Mozambique to South Africa’s gas nodes such as Gauteng. 

There are similar infrastructure limitations that stand in the way of Total’s recent gas discovery at the Brulpadda and Luiperd prospects off the Southern Cape coast.

Igua-SA has proposed several measures that could reduce the likelihood of Day Zero. These include:

  • The government in South Africa, in line with its existing policies, to urgently establish sufficient gas-to-power capacity on the Rompco pipeline to increase the demand for gas energy by 40-60PJ (petajoules), which will render gas-receiving infrastructure investment in Matola, Mozambique, economically feasible;
  • Eskom, as part of its short-term power purchase programme, to increase power availability, procure additional electricity from planned gas-to-power developments in Mozambique, and also render gas-receiving infrastructure investment in Matola economically feasible through increased gas volume throughputs;
  • The government ensures that the Rompco and Lilly pipelines are linked before 2026 to provide gas energy security for KwaZulu-Natal;
  • The government provides financial guarantees to underwrite the investment in gas-receiving infrastructure in Matola to ensure the economic sustainability of the South African manufacturing sector; and
  • Sasol to embark on a reasonable, phased reduction of supply, which could be gradually offset by increased reliance on other sources, instead of a unilaterally imposed hard cut-off of gas. DM
Gallery

Comments - Please in order to comment.

  • Fanie Rajesh Ngabiso says:

    ANC, are you really going to keep pretending you know what you ate doing until everyone has lost everything?

    It is past time to do the right thing for South Africa and get out of the way.

    It is not too late to do the right thing.

  • Andrew Blaine says:

    Why wait for the Government? Are the large users bot able to privatise and profit from the privatisation?

    • Riaan Roux says:

      Sadly the problem is scale. There are not enough port, road, pipe or rail facilities to imediately make up for the 40 P/J shortfall. Gas will also cost considerably more. The 70 000 people who will loose their jobs is very conservative. 400 000 at this stage looks more realistic.

    • Bob Dubery says:

      Well the large users (EG Jozi Gas) need a supply of gas from somewhere. Right now the City of Johannesburg sources gas (which is piped to businesses, homes and used in buses) from Sasol in Secunda who, in turn get it from Mozambique. I suppose they COULD do their own thing given time and resources, but it would inevitably be more expensive as they would have to lay and operate the pipeline.

      • Wendy Dewberry says:

        But the kickbacks . When there is enough gas all around the globe… it feels like this squeeze is about money. And fracking.

  • Ben Harper says:

    But this is what the climate crazies want – surprise suprise, they’re going to get it faster than they bargained for and are going to be the first ones to cry when they can’t get their steamed skinny decaf latte’s

    • Colin K says:

      Ben Harper, you should maybe considering reading and commenting later in the day when your natural or pharmaceutical good sense kick in. We other commentors haven’t seen a more cogent argument from you than “Hahahaha” or “Aw diddums”. You make think yourself incredibly witty or the bastion of truth but your comments invariably contain no facts or arguments and thus do nothing to counter your opponents and are merely your opinions – to which are entitled, however ill-informed.

  • Gavin Knox says:

    The agreed kick back amount must first be agreed to, before the anc cader involved in this scenario will consider any action. The fact the country will suffer, means absolutely nothing….

  • Peter Forder says:

    ” four months ” takes me to (end of) June 2024 … NOT ” June 2026 ” !!!
    This report needs correction and/or clarification.

    • Tony Gomes says:

      You need to read the whole article to understand that some things need to be in place within 4 months. I agree that it does seem a somewhat alarmist and one-sided article, but ja, at least read before you think before you write.

    • ANTHONY MCGUINNESS says:

      Read the article again Peter. The infrastructure will take years to implement after the agreements are in place,

  • Richard Bryant says:

    Sounds just like the warnings given by Eskom to the cadres in the early 2000s. Here we are more than 20 years later and dealing with the utter incompetence of the cadres. What hope is there then for this obese morass to look up from their lavish lifestyles and take the gas issue seriously when there is still 2 years left to do nothing??

  • Nicky Blooms says:

    The ANC will deal with it after they win they election, as they know they will win. All the poor will vote, to keep their grants and free stuff from the ANC. I always vote, but coalition governance doesn’t seem work in our country. The DA is still the best chance of any service delivery, but they won’t be governing. Take your money, your skills, your family and leave.

  • P C Hem says:

    Nothing will happen, the gas will run out and the powers at be will start panicking as negotiations have been based on who could screw the most out of any new construction contracts which then turn out to be fraudulent and unviable.

    • Peter Smith says:

      Many residential users moved to using gas for cooking and heating to overcome load shedding. And many industries use gas. The consequences of this could be the final straw.

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