The government's failure to respond to South Africa's looming gas crisis could land the country with another Eskom, says Jaco Human, executive director of the Industrial Gas Users Association of Southern Africa.
Sasol, the monopoly supplier of South Africa's natural gas, “dropped a bomb in the middle of the industry” with its announcement last year that it was terminating supplies from its gas fields in Mozambique in June 2026 because of dwindling reserves, he says.
“They said we're pushing you over the cliff and we're not going to let you participate in the remaining gas that is available.”
The way to avert this crisis has been highlighted by the industry for years but the government has ignored it, says Human. His message to the government now is clear: “The solution is not complex, the solution is not onerous and the solution is on the table. Deal with it or you're going to have another Eskom on your hands.”
The only practical alternative to Sasol is to import liquefied natural gas (LNG) from the port of Matola in Maputo. But to beat Sasol's deadline, construction of the necessary LNG import terminal there must begin within four months. Otherwise, heavy users in industries such as chemicals, steel, glass, and food and beverages will be left high and dry with a cost to the economy of between R300bn and R500bn a year and the loss of 100,000 jobs.
The project, which is backed by French energy multinational TotalEnergies and their local partners, is “shovel ready”, says Human, but before they begin construction they need offtake guarantees which only the government can provide.
We've been saying to government for years the decisions it needs to make are non-negotiable in order to avert an economic catastrophe
“We only have about 50 petajoules of gas that we can procure, where in reality we need at least 100 petajoules to make these big infrastructure developments at Maputo — costing in the range of US$300m [about R5.6bn] to $500m — economically viable.
“So there's a gap. Government can fill that gap by making sound decisions around gas-to-power generation, in other words increasing the demand for gas.”
But the government has ignored for at least seven years industry pleas for action to address the looming crisis. Now the crisis is here, says Human.
“We've been saying to government for years the decisions it needs to make are non-negotiable in order to avert an economic catastrophe. The solutions on the table are the same as they've been for at least six years.
“We have to focus on the development of LNG infrastructure in Matola. We have to build out the demand for gas through sound gas-to-power decisions. We have to link the [government-owned] Rompco and Lily pipelines to enable KwaZulu-Natal to benefit from this supply chain of gas through Matola. Government has to take a position on the sovereign guarantees and take a stake in some of these projects, whether on a sovereign guarantee basis or something else.”
Letters they've written to the department of mineral resources & energy and the Presidency over the years “point to all these things”, and the need for a master plan.
“There is no gas master plan yet so we're still not sure what the government's position is around all these matters.”
It should start with an integrated energy plan, which the government has not published, integrating electricity, natural gas, liquid fuels and other energy types into a co-ordinated vision and policy position, he says.
“We don't have an integrated energy plan. We have an electricity plan in the form of an Integrated Resource Plan 2023. We don't have a gas master plan, we don't have a liquid fuels plan for the country, and so on and so forth. We simply don't know how all these energy bits and pieces fit together at the company level.
“It's because of the absence of an executable gas master plan that we find ourselves in this position at the moment.”
Could industry have done more to avert the crisis now heading its way?
“One can always look backwards and say we could have done more, we could have acted earlier. But one needs to look at that in the context of the structural market deficiencies in South Africa.
“For 20 years we've had a monopoly supplier of gas in Sasol, which had no interest in having competition in terms of LNG imports.”
In fact, Human says, Sasol used the National Energy Regulator of South Africa's processes to block LNG infrastructure developments.
“The other problem is that governments are typically responsible for developments around network economics. Industry is not in the business of investing in network economics. Industry is not in the business of building LNG infrastructure. Industry is not in the business of building gas pipelines, and industry does not intend to do so.
“The provision of pipelines, policy positions, bilateral agreements with the Mozambique government and so on, are squarely in the government space.”
Their inputs to the elusive government master plan continuously stressed the gas-to-power decisions that had to be made and the fact that the government would have to take some risk on necessary infrastructure developments such as LNG import terminals, Human says.
“Following Sasol's announcement this all became a reality. Prior to that we always said, when this happens, if it happens ... now it's here, it has arrived.”
Couldn't better scenario planning by industry have anticipated this, with a plan B in the pipeline to avoid what they now say is a catastrophe?
“We could raise that argument with regard to electricity as well. It doesn't change the outcome. Because we're dependent on Eskom, we're dependent on all these networks to provide us with inputs. They simply have to function, and government has that particular role to fulfil.”
The fundamental problem is that for at least 10 years “there's been absolutely nothing happening in the gas energy space, and we're going to pay a heavy price for this”.
“The fact that we don't have a gas master plan, that we don't have an integrated energy plan dealing with the integration of gas into the broader energy space speaks to all of this: the fact that we're finding ourselves in this vague, opaque world of industry having to pick up the ball and run with it and try to find solutions.”
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