Act now to avoid gas crisis, say users
• Only four months left to put in place solutions for 2026 cutoff
Industrial gas users say SA now has only four months to act to avoid “day zero” for gas supply in 2026 when Sasol will stop supplying natural gas from Mozambique under its current contract.
There are still no confirmed supply solutions that will come on stream early enough to prevent the flow of gas coming to a halt in 2026, raising the prospect of devastating consequences for the economy and jobs as gas is used by many industries, such as chemicals, steel, glass and food and beverages.
Jaco Human, executive director of the Industrial Gas Users Association of Southern Africa (IGUA-SA), said they had been warning the government about this impending crisis for at least six years.
According to Human, the members of IGUA-SA, which represents industrial gas users such as Consol Glass, Illovo, Nampak, Mondi and ArcelorMittal, contribute about R300bn to the SA economy every year and directly employ 65,000 people.
All of this is now at risk if nothing is done in the next four months to secure gas supply beyond 2026.
It has been clear for years that new gas supply had to be secured for industrial users in KwaZulu-Natal, Mpumalanga and Gauteng who now rely on Sasol, the monopoly supplier of SA’s natural gas, which it sources from its Pande and Temane gas fields in Mozambique and transports via the Rompco pipeline.
Sasol also supplies methanerich gas produced at its plant in Secunda to KwaZulu-Natal and Mpumalanga via the Lilly and SWM pipelines.
However, the situation became more urgent when Sasol announced last year that it would cease the supply of gas via the Rompco pipeline to traders and industrial users in June 2026.
New supply can be acquired from a project to import liquefied natural gas (LNG) into the Matola port in Mozambique, but for this to happen fast enough to avoid a day zero scenario the market has to commit to offtake volumes before the development of the infrastructure necessary to link this new supply to existing infrastructure will start, said Human, speaking during a webinar hosted by EE Business Intelligence on Tuesday.
For many of IGUA-SA’s members, said Human, fixed capital investment stopped in late 2023 as companies waited for the uncertainty about future gas supply to be resolved.
“That will have an impact on medium-term economic development,” he said.
If no immediate solution is found the industry, which already faces a loss of competitiveness, expected “an invest
ment hard stop” by users from 2024, with reduced output from 2026. This would then be followed by closures of plants and factories in KwaZulu-Natal, Mpumalanga and Gauteng if nothing changed.
SHOVEL READY
Beluluane Gas Company’s (BGC) LNG import terminal project at Matola — which is being developed by Southern African energy group Gigajoule, French energy multinational TotalEnergies and Mozambican natural gas distributor Matola Gas Company — is the “most shovel ready” project.
But according to current project timelines, the date by when this project would be able to start supplying gas to SA industrial users will still overshoot day zero by several months.
To move this project along quicker in an attempt to narrow and possibly close the “dead zone” between when gas supply from Sasol will stop in 2026 and when new supply can be secured, there needs to be viable gas demand in addition to industrial gas demand.
This additional demand is expected to come from the energy sector, said Human, and could either be for the development of gas-to-power generation facilities in SA along the Rompco pipeline or SA would have to enter into electricity purchase agreements with Mozambique to support investment in the gas infrastructure in Matola.
In addition, there needed to be urgent investment in linking the Rompco pipeline with the Lily pipeline to provide gas energy security to industrial users in KwaZulu-Natal.
“We need government to play a role in this,” he said. “We have four months to switch on the landing lights on the development of gas infrastructure to substitute the shortfall of supply from 2026 onwards.”
Jurie Swart, the CEO of Gigajoule who also spoke during the webinar, said the LNG import terminal and regasification unit at Matola would be connected via pipeline to the existing gas network of Matola Gas Company, and this Matola pipeline would then be extended to join Rompco.
The volumes that BGC intended to supply are “more than sufficient to solve the gas cliff problem” industrial users in SA face, Swart said.
SECURE DEMAND
To start the project sooner, they would need to secure offtake of at least 100 petajoule (PJ) of gas. SA commercial and industrial clients will already account for 40PJ, but the project would then require at least another 60PJ of secure demand from a “power anchor off-taker”. This would translate to a gas-to-power project of at least 1,200MW.
FIXED CAPITAL INVESTMENT STOPPED IN LATE 2023 AS COMPANIES WAITED FOR THE UNCERTAINTY ABOUT SUPPLY TO RESOLVE
THE MARKET HAS TO COMMIT TO OFFTAKE VOLUMES BEFORE THE DEVELOPMENT OF THE NECESSARY INFRASTRUCTURE