Sasol says South Africa will have to learn to live without its natural gas as resources from Mozambique dry up, with businesses scrambling to find alternative gas supplies for their operations.
Sasol CEO Fleetwood Grobler said the petrochemical giant had indicated to industrial users of the natural gas it supplies from Mozambique that it was going to cut supply by 2026 and was proposing the establishment of a gas vector that would bring in liquified natural gas (LNG) imports.
“It is what it is, that is what is currently happening. In the longer term the surest source of gas for South Africa, and it is also in the Integrated Resource Plan (IRP) 2023 that was published, is that we need to bring in a gas vector in South Africa. The surest way will be to bring in LNG because LNG is available today, you don’t need to drill for it or take a gamble for it, it is available.”
Grobler said the government and industrial users had to sit around the table to find solutions for bringing in LNG supplies.
“What we need to do in South Africa is to put the minds together of both the users of gas which include both Sasol and our industrial users of gas and say how can we solve that problem because Sasol by itself cannot import all the LNG and sell it on. Our balance sheet cannot afford it, we do not have the means to do it, but we are part of the solution. That is the only thing we have signalled. We have said, ‘Guys, the gas is going to decline and that will happen in 2026’, so if you interpret it as a cliff, yes it could be a cliff, but we need to do something.”
Grobler said it was encouraging that late in 2023 the department of trade, industry & competition convened a forum with gas participants, including Sasol and the department of mineral resources & energy, on how South Africa can resolve the problem and explore options to bring in LNG through Maputo or Richards Bay.
The Industrial Gas Users Association of Southern Africa (IGUA-SA), whose members include companies manufacturing glass, steel, ceramics, chemicals and those in the food business, has flagged the need for measures to avoid a “gas cliff” as Sasol prepares to limit supply.
Italtile CEO Lance Foxcroft said the company’s manufacturing operation and ceramic industries depend on natural gas for all drying and firing processes in the production of ceramic and porcelain tiles and vitreous china sanitaryware, and any reduction in supply was cause for concern.
Resource security is of paramount importance to the manufacturing operations and ensuring affordable, adequate and reliable energy supply is a critical imperative
— Italtile CEO Lance Foxcroft
“Resource security is of paramount importance to the manufacturing operations and ensuring affordable, adequate and reliable energy supply is a critical imperative.”
He said 8% of the group’s ceramic natural gas requirements are currently contracted to Renergen, a domestic LNG supplier.
“Ceramic continues to pursue, both independently and through IGUA-SA, opportunities and developments to secure future gas supply for its factories including imported LNG, domestic LNG, LPG, biogas and coal syngas options.”
Task team
ArcelorMittal South Africa (Amsa), which relies on Sasol natural gas mainly for reheating and other processing needs, said it was working closely with the IGUA-SA to find alternative economic options. “We are also engaging with many stakeholders in this space to look for options to economically secure supply,” said Amsa.
IGUA-SA highlighted the economic effect of the decision, saying gas industry users directly employ 70,000 people and contribute between R300bn and R500bn a year to the economy.
At the African Energy Indaba in Cape Town, mineral resources & energy minister Gwede Mantashe said the two departments had established a task team that included private sector players to develop a joint strategy that would ensure a seamless transition and business continuity and avoid potential job losses.
His department had also completed all the modelling and drafting work for the country’s gas master plan, which it aims to present to the cabinet later in March.
Mantashe said gas was a critical part of the government’s energy plans with 2019 IRP requests for proposals including the procurement of 2,000MW under bid window 1 of gas-to-power.
“We have noted concerns regarding the current and future gas supply in the South African market due to commercial disputes between Sasol and its customers. Our understanding is that this is in relation to the gas flow decline at source. It is a known fact that natural gas, like other natural resources, is a finite resource and, therefore, Sasol reaching a cliff in its gas block in Mozambique is not an anomaly.”
Central Energy Fund subsidiary iGas’ acquisition of an additional 40% ownership of the Rompco pipeline resulted in South Africa and Mozambique jointly owning 80% of the pipeline.
Asked at a media briefing about business’s fears about the “gas cliff”, Mantashe said the private sector needed to engage with the government to find a solution to the gas supply constraints they dreaded.
South Africa had entered into a gas sales agreement with the Mozambican state-owned hydrocarbon company, which has the potential to “deliver up to 200 petajoules of natural gas”, he said.
“To breathe life into this agreement, PetroSA, another subsidiary of the Central Energy Fund, has applied for a gas trading licence with the National Energy Regulator of South Africa.
“We are convinced that the granting of this licence will ensure continuous gas supply,” the minister said.
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