Amid a looming gas supply crisis that will hit users from mid-2026 when monopoly Sasol has indicated it will cease supply, SA’s industrial users of natural gas are moving forward with the establishment of a gas aggregator company.
This company aims to provide the basis for large-scale gas infrastructure investments and transactions.
Jaco Human, CEO of the Industrial Gas Users Association of Southern Africa (IGUA-SA), says the establishment of the gas aggregator will enable SA manufacturing to transition from a fragmented market to a consolidated and structured one, facilitating secure, long-term gas infrastructure development and supply.
Business Day spoke to Human bout the progress made in setting up the gas company and how it will help address the threat of a looming gas shortage.
What progress has been made so far in setting up the gas company?
Upon Sasol’s announcement that they would be exiting the natural gas supply market, industrial gas users realised we needed a solution. The first step was to evaluate the feasibility of setting up a gas aggregator company and determine how it would operate, its governance structure, and who would benefit from it, among other things.
We found the project feasible. During the feasibility stage, we adopted principles around the venture, including the need for the gas aggregator company to transition from a fragmented market to one where long-term commitments, such as infrastructure projects, could be enabled by leveraging consolidated balance sheets and aggregated demand.
Another important principle is that this entity will not have a profit objective. It needs to cover its costs, including the cost of molecules, transportation and distribution of gas, but it is not set up as a profit-driven trader. In other words, the company will operate on a cost-pass-through basis.
Additionally, we accept the need for full transparency for all participants regarding the upstream agreements concluded through the company, and participation will be on a proportionate basis. About 30 companies and organisations are participating in this venture, and the door is open for more to join.
Detailed implementation plans and budgets have been drawn up, and the Competition Commission granted a block exemption for an initiative of this nature. The feasibility study was concluded in April, and we are now in the opt-in phase. We need to conclude the commercial discussions and contractual work around future gas supply as we move into the commercial side of the venture.
Term sheets will be concluded with infrastructure developers, gas suppliers and gas transportation service providers in the coming months. Financial instruments to facilitate transactions of this scope and magnitude are being developed with major financial institutions.
We are also gaining absolute clarity on how the entity will ultimately look from a governance and shareholder perspective. After this phase, which should be concluded within the next eight weeks, the next step will be to incorporate the company. By that point, it will be able to enter long-term contracts on a binding basis and meet future regulatory requirements.
For clarity, will the gas aggregator company act as a buyer and seller of gas for multiple users?
Indeed. It will buy gas and gas transportation and obtain the required financing from banks, as well as provide administrative services. Essentially, it will procure these elements and on-sell them to users with the delivery of gas.
Will the gas company invest in gas infrastructure?
That is not the initial priority, but we have seen with other gas aggregators that, over time, as they mature, they do become infrastructure players. Therefore, we are not excluding that possibility. In the interest of gas supply, energy security and cost competitiveness, the company may find itself, at some point in the future, needing to own, for example, terminals or build a pipeline between SA and some neighbouring countries.
How will setting up the gas aggregator company help address the expected gas supply crisis in 2026 when Sasol ceases supply from Mozambique under its present contract?
Currently, no single entity, either from the private or public sector, has stepped forward to offer an alternative solution for gas supply to industrial users. Therefore, we need to build the structures and marketplace that will enable and render feasible the scale of infrastructure investment needed.
Gas aggregators are typically incorporated as state-owned, or state-operated entities, with risk borne by the state in the national interest. Their primary purpose is to secure a steady flow and stable pricing for gas to support manufacturing and power-generation sectors. In the absence of such a state co-ordinated mechanism in SA, the industry has been driven to establish this private model.
By setting up the gas aggregator company and consolidating the demand from various off-takers, negotiating with gas infrastructure developers, suppliers, and systems operators for efficient pricing and terms of gas delivery, we believe the initiative will help bridge the gap between supply and demand. The company will act inclusively as an intermediary marketplace across the entire gas supply chain, facilitating the development of gas supply infrastructure, sourcing, transport, and distribution.
Is there still time and a way to avert the so-called gas supply cliff in 2026?
The gas cliff will happen due to the depleting gas resource SA now depends on. However, over the past two months, we have seen changes in how we anticipate managing the transition. A company like Sasol is critical in managing this process in collaboration with the industry.
Our conversation with Sasol now focuses on whether it would be possible to extend the cut-off to, for example, June 2028. This extension is critical but does not mean we can move slower on finding alternative future solutions. It does, however, give us more time to put those alternatives in place. A June 2026 gas supply cut-off is inconceivable for the SA economy, as there will simply not be another option in place by then.
So far, the discussions with Sasol have been positive. I would cautiously say that options are opening that would enable us to better manage the risk of the transition. However, we are still far from having absolute certainty as the risk of possible gas curtailment during the transition period still looms large.
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