By NJ Ayuk, the Executive Chairman of the African Energy Chamber (www.EnergyChamber.org) and Author of A Just Transition: Making Energy Poverty History with an Energy Mix
South Africa is a regional heavyweight. Its economy is one of the largest on the African continent – as well as the most diversified, the most industrialized, and the most technologically advanced. It has more extensive road and rail networks than any other African state, a feature that puts it in a good position for future growth.
But South Africa also has a very big problem. Since 2007, the national power provider Eskom has not been able to produce enough electricity to cover domestic demand – and the ever-widening gaps between supply and demand have given rise to a steady deterioration in power supplies and citizens’ quality of life. They’ve made blackouts commonplace, and they led President Cyril Ramaphosa to take the unprecedented step of declaring a "national disaster" in February.
I’d like to say that South Africa has reason to look forward to relief within the next few years – that the country has laid a foundation for using its own natural resources to resolve its energy shortages and can expect conditions to improve over time. Unfortunately, it would be premature to make such a statement.
Here are some of the reasons why.
Coal, Carbon, and Gas
As detailed in "The State of South African Energy," (https://apo-opa.info/42oP0Ra) a new report prepared jointly by the African Energy Chamber, the country’s electricity shortages stem in large part from problems with Eskom’s coal-fueled thermal power plants (TPPs). These stations have long served as the backbone of South Africa’s power sector, but Eskom has failed to manage, maintain, and expand them adequately. Unfortunately, the results of its failure are glaringly evident in the form of load-shedding and increased reliance on diesel generators.
In the meantime, there’s another complication at hand, in that South Africa’s government has pledged to reduce the power sector’s carbon emissions intensity. That pledge hampers the country’s ability to compensate for Eskom’s previous failures by building more coal-burning TPPs or expanding existing facilities (steps the chamber believes are necessary to resolve the crisis). That means the country must find lower-carbon energy options.
One obvious lower-carbon energy source is a pair of massive natural gas fields that TotalEnergies has found offshore in Block 11B/12B, a license area in the Outeniqua basin. According to documents the French major has submitted to South African authorities in the hope of securing environmental authorization for development, the two fields may hold as much as 4.5 trillion cubic feet (127.4 billion cubic meters) of gas in recoverable resources. Luiperd, the larger of the two sites, appears to contain around 3 tcf (85 bcm) of gas, while Brulpadda field appears to contain another 1.5 tcf (42.4 bcm).
TotalEnergies has been trying to negotiate a deal that would involve pumping production from Luiperd through a 109-kilometer, 18-inch pipeline to the FA platform, an existing offshore facility at state-controlled PetroSA’s Block 9. At the FA platform, the gas could then be transferred to existing infrastructure for delivery to customers on South Africa’s southern coast. Likely buyers would include PetroSA, which needs feedstock for its idle Mossel Bay gas-to-liquids (GTL) plant, and Eskom, which needs fuel for gas-burning TPPs.
Theoretically speaking, this deal makes a tremendous amount of sense for South Africa. The country needs a relatively low-carbon way to generate more electricity, and it just so happens to have a lot of gas available in fields off its southern coast. Shouldn’t it be rushing to develop these fields?
Bad Timing and Limited Patience
South Africa’s energy challenges will be front and center at African Energy Week scheduled to take place on 16-20 October in Cape Town.
Practically speaking, though, South Africa hasn’t been in a rush at all. Instead, it has let the process play out for too long.
Last year, TotalEnergies was upbeat, saying it was on track to wrap up a gas sales agreement (GSA) for Block 11B/12B in September 2022 – and that if it could do so, it would be in a position to start extracting gas from Luiperd in 2027. Since then, though, negotiations on the GSA have stalled out, largely because the state-owned companies involved in the process (PetroSA and Eskom) have been dragging their feet over questions related to pricing and financing.
In the meantime, load-shedding has only grown worse and worse, putting the country’s economic well-being and sparking civil unrest.
What’s more, TotalEnergies has grown exasperated with the delays. As described in our report, it informed South African authorities in January 2023 that it was considering swapping the original plan to supply the domestic market for an alternative that would see future production exported via a floating liquefied natural gas (FLNG) vessel with a capacity of 3.4 million tons per year (tpy).
It’s easy to see how such an arrangement might benefit the French major and its partner, QatarEnergy. It would give the two companies a way to produce and deliver more LNG to markets in Europe and other regions where demand is high. However, the idea of fast-tracking a project in order to facilitate the export of gas from a country that’s running short of energy is so politically dicey that South Africa’s government is unlikely to approve it, which means that there may be even more delays ahead.
Ramaphosa’s government can avoid that outcome, though, by taking the steps necessary to authorize TotalEnergies’ original plan – that is, the one that aims to supply the domestic market – and make the FLNG option less attractive. This will involve taking practical steps such as providing guarantees for Eskom and PetroSA as they sign the GSA, since neither state-controlled company is in a solid financial position. But it will also involve summoning the political will to break the deadlock and stop simply letting matters get worse.
Distributed by APO Group on behalf of African Energy Chamber.
The "State of South African Energy Report" will be released later this month. Visithttps://EnergyChamber.orgfor details.