The Central Energy Fund's Gas Master Plan

Ensuring Energy Security Through Natural Gas

By Jessie Taylor

South Africa has developed a plan to increase natural gas usage in its energy mix, and the Central Energy Fund (CEF) will play a key role in ensuring natural gas supply. The CEF is a state-owned enterprise that reports to the Department of Mineral Resources and Energy. Its mandate is to contribute to the security of the energy supply of South Africa and the region through exploration, acquisition, development, marketing and strategic partnerships.

Cabinet approved the Gas Master Plan in March. It will enable a natural gas economy that is favourable to investors and can provide an alternative source of energy for the country’s electricity sector.

Mineral Resources and Energy

Minister Gwede Mantashe said the plan seeks to ensure a seamless transition and business continuity while mitigating potential job losses in the energy sector.

Addressing Energy Needs

The Gas Master Plan aims to put measures in place to address the country's energy needs, and lays out the government's intentions to make gas a critical component of South Africa’s energy mix.

Estimates suggest South Africa may run out of natural gas supply in 2026, which could have significant implications for jobs and manufacturing. This has been exacerbated by difficulties in global supply.

To assist in increasing natural gas supply, the Department of Trade, Industry and Competition has established a task team that includes private sector players to develop a joint strategy around natural gas supply.

Minister Mantashe said: "The Gas Master Plan recognises South Africa’s abundance of primary energy sources which, if commercialised, could drive economic growth, social development and thus benefit the country."

The plan gives policy direction to the industry, considers gas supply options, and facilitates an infrastructure network, including options and contingencies for demand uncertainties, as well as moves to cleaner technologies. It is a policy instrument that serves as a roadmap for strategic, political and institutional decisions for the sector and promises that the country’s natural gas demand is well managed.

The plan has also identified 11 potential ‘gas demand nodes’ across the country and proposes initiatives like converting Open Cycle Gas Turbines into Combined Cycle Gas Turbines, new builds, and the conversation of retiring Eskom power stations into gas power stations.

Critical Investment In Gas

The European Union taxonomy has declared both nuclear and gas as sustainable and part of energy transitional activities, making it essential for African nations to invest in gas infrastructure, including expansion of pipelines.

To aid this goal, iGas, a subsidiary of the Central Energy Fund (CEF), has acquired an additional 40% ownership of the Republic of Mozambique Pipeline Investments Company (ROMPCO) pipeline, resulting in both South Africa and Mozambique jointly owning 80% of the pipeline.

South Africa has also 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, and PetroSA, another subsidiary of CEF, has applied for a gas trading licence with the National Energy Regulator of South Africa.

PetroSA is fast-tracking its “Gas to Power” initiative to provide an early power generation solution that will leverage the commercialisation of its tail gas for power generation for Eskom. Through this project, PetroSA is expected to plug approximately 180 megawatts of power into the national grid as a long-term solution to address challenges relating to load shedding.

In addition, the CEF committed R1 billion to a natural gas project, the Virginia Gas Project in the Free State. The field is said to have one of the world’s highest helium concentrations.

The CEF signed a term sheet to invest the funds in return for a 10% state in the project. The project is owned by Renergen, an emerging gas producer listed on the Johannesburg and Australian stock exchanges.

The Virginia Gas Project holds the first and only onshore petroleum production right in South Africa. It produces around 1,000GJ liquid natural gas (LNG) daily.

Dr Ishmael Poolo, the CEF Group Chief Executive, said: "Energy is the key source of a country’s economic development and this is because many production and consumption activities involve energy as a basic input. Therefore, energy is essential for the functioning of any modern economy and the Central Energy Fund (CEF) does the important job of maintaining adequate energy supply in South Africa."