LNG offers breather for energy scarcity
PROMISING recent resource finds in Mozambique and Namibia – as well as Cote d’Ivoire, Uganda and Tanzania – bode well for Africa’s future. Exploration is being pursued with renewed vigour, and the world’s energy companies are eyeing the continent with keen interest.
The potential for liquefied natural gas (LNG) is especially attractive – as new liquefaction and regasification technologies have made LNG a competitive means of energy distribution.
The recent finds also offer the promise of an LNG boom that could change the fortunes of many African nations, while also meeting their people’s energy needs – at lower environmental cost than other hydrocarbons. The key is unlocking these opportunities and providing the policy framework to enable them.
For South Africa, refining the Upstream Petroleum Resources Development Bill into a commercially competitive and certain act would be a great step towards enabling these opportunities. After that, another clear solution would be partnering with A-list international investing explorers, who come with their own balance sheets, skills, experience and reputational exposure to do the job.
Even while partnering with foreign organisations, South Africa can retain control of our resource wealth through the way we negotiate licence terms of (free) carry, tax rates, development commitments, tenure, skills readiness and harmonised regulations.
Such partnerships would present an opportunity to grow South Africa’s skills base in the oil and gas sector.
Mozambique is an example of what can be achieved by partnering with international energy firms to unlock domestic resource potential.
Our eastern neighbour is about to export Eni’s first offshore-platform cargoes, and the Cabo Delgado Total onshore plant operation in Afungi looks set to restart.
A recent discovery in the offshore Orange Basin off Namibia’s west coast will likely also yield billions for Namibia. Both Shell and Total’s consortia have massive Namibia finds at Venus1 and Graff1.
Industry insiders are gushing with superlatives at what a game changer this find will be for Namibia. The find has been called the biggest ever in sub-Saharan Africa.
The critical issue for South Africa is that this game-changing find is in the extreme south of Namibia’s territorial waters. Neighbouring offshore blocks in South African waters likely hold very similar potential.
But investors have other attractive global options. We need to ensure that South Africa becomes a practical investment destination compared to these rival opportunities.
While we accelerate our move towards renewable energy, there remains a need to underpin the intermittency of wind and solar with reliable, dispatchable baseload power. We can do that with coal, as we do now. Or more economically, with around 30% fewer CO2 emissions by using LNG.
At a time when South Africa’s power-supply deficit has become self-evident, LNG also offers a short-term solution in that it can be imported, through the South African and Mozambican ports network, and plugged into pipeline infrastructure relatively quickly.
Perhaps unfortunately, the world will need oil and gas well beyond mid-century to meet all of its energy needs. And of these options, gas is the less harmful.
Gas will enable renewables at lower environmental cost – granting us the medium-term energy independence to continue renewables investment. This is the “just transition” in practical action.