Master plan has no solutions for gas crisis

The load-shedding crisis could have been avoided. The government was warned two decades ago of the disaster that was to come if it did not make timely investments in new generation capacity. But it didn’t listen until it was too late.

Now another energy crisis looms, one that will affect businesses that employ 70,000 people and generate up to R500bn for the economy. But it seems likely that the government will again squander the chance to act in time to prevent catastrophe.

Like much of the energy planning and policy development from the department of mineral resources & energy, the draft gas master plan, which was published at the end of April, did not match expectations (or reality). Much like the draft Integrated Resources Plan of 2023 published in January, which failed to sufficiently address SA’s immediate electricity supply crisis, the gas master plan also does not provide a solution for the risk that SA will run out of gas to supply industrial users by 2026 when Sasol, the monopoly supplier of piped gas in SA, will stop supplying natural gas from Mozambique under its current contract.

The Industrial Gas Users Association of Southern Africa (IGUA-SA), which represents industrial gas users such as Illovo, Nampak, Mondi and ArcelorMittal, has been warning the government for years that alternative plans had to be made to avoid a “day zero” for gas supply in 2026. SA only has until mid-2024, at the latest, to secure gas supply beyond 2026, so it was disappointing for the industry that when the gas master plan was published it offered no real solutions. As Jaco Human, executive director of IGUA-SA, says the master plan offers no realistic solution for industrial gas supply for the period from now to 2030.

To address the supply crisis from 2024 to 2030, the plan appears to rely on gas supply from the floating gas storage regasification units that will stand alongside three Karpowership gasto-power floating power plants planned under the risk mitigation independent power producer procurement programme. However, these projects are on hold after they lost the grid capacity that was allocated to them when Eskom decided in January not to provide a further extension for the budget quotes it had issued for these long-delayed projects.

The plan suggests engaging with regional gas producers to unlock additional supply but does not seriously engage with whether there is enough that can be tapped to avoid day zero.

The master plan makes no mention of the one project that gas users have identified as the most feasible solution to the immediate crisis, which would be to get new supply from a project to import liquefied natural gas (LNG) into Mozambique’s Matola port.

Without a clear, near-term solution, industrial gas users are left with few options. Some could perhaps switch to coal to power their operations. More likely, they might have to cut back on operations and many stopped fixed capital investment in late 2023 as companies wait for the uncertainty about future gas supply to be resolved.