The price of natural gas to industrial customers in SA would rise by about 2% a year, excluding discounts, if the National Energy Regulator of SA (Nersa) granted the Republic of Mozambique Pipeline Company’s (Rompco)’s revised application for a transportation tariff, Rompco GM Louis Bosch said on Tuesday.
Natural gas prices are controversial because in a market in which demand exceeds supply, SA has only one supplier, Sasol, that sources it from the Mozambican pipeline.
Nersa has disagreed with aspects of Rompco’s application for a tariff of R49.87/gigajoule (GJ) to recover the capital cost of adding 24 megajoules (MGJ) of capacity to the pipeline. A date for public hearings on the application is still to be finalised but Rompco needs a decision by January 1, when it will start to deliver the additional gas.
Rompco is 50%-owned by Sasol Gas, 25% by the South African Gas Development Company (iGas), a SA state-owned entity, and 25% by Copanhia Mozambicana de Gasoduto, a Mozambican state entity.
Rompco adds capacity in modules and is granted a tariff to recover each investment. The current tariff on the first expansion is R13.34/GJ and on the second expansion R12.87/GJ.
Last year, the shareholders allocated R2.7bn for a third investment in the pipeline from Sasol’s Pande and Temane fields in southern Mozambique, which supplies customers in both countries. Although Loop Line 2 has added 24MGJ of capacity, the current gas fields can supply only 7.8MGJ a year and will be exhausted by 2029. Sasol has begun exploring additional oil and gas fields in the area.
Rompco is not only asking for a significantly higher tariff than with previous expansions, but has added more capacity than needed. This application is well below Rompco’s previous request to Nersa for a tariff of R70.24/GJ, which was rejected.
Bosch said Rompco could recover its investment at a lower tariff because the project was completed below budget.
No customer, he said, would pay R49.87/GJ because the final transportation tariff to all customers would be the weighted average of the three tariffs for the total pipeline investment.
If, after three years, the full 24MGJ of capacity is used, the tariff will decrease so that the total increase in the charge to end users will be only 0.5%.
Adding less capacity would not have been cheaper, Bosch said. A smaller diameter pipeline or a shorter loop-line would have necessitated shutting down supply to SA for between seven and 14 days to tie into the existing line, which was more costly.
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