South Africa has the possibility of introducing a variety of sources of natural gas which could be economically available within a 25 year planning horizon to 2040. Sources could include extensive expansion in natural gas from shale gas, production from deep-water offshore fields and development of a regional natural gas pipeline network. Indigenous and regional gas can play a critical role in growing the economy of the country and the region.
The realisation of the potential natural gas reserves within the SADC region, and especially the potential held within South Africa for indigenous gas, represents a significant opportunity to boost economic growth, employment and investment. In addition to providing strategic security of supply for electricity generation, the development of these gas reserves will provide significant investment opportunities in South Africa and the region in economic infrastructure and new energy opportunities for industrial, commercial and residential applications and fuel switching.
Natural gas is capable of providing more than just electrical power, it will also provide direct heat and chemical feedstock for industrial processes, commercial and residential cooking and heating applications as well as an alternative fuel source for transport.
A number of national policy documents, including the White Paper on the Energy Policy of South Africa approved in 1998; the National Development Plan (“NDP”); the draft Integrated Energy Plan; and the Integrated Resources Plan 2010–2030 present the case for natural gas as a significant contributor to South Africa's energy mix.
The NDP identifies natural gas as a viable alternative to coal. The NDP provides as one of the infrastructure priorities, the construction of infrastructure to import LNG and increasing exploration to find domestic gas feedstock.
In support of the vision for the South African gas programme, the Department is developing an LNG to Power IPP Procurement Programme. This programme will serve as an anchor for the gas infrastructure required for the establishment of a gas market in South Africa. The introduction of gas into the South African economy will lower the country’s carbon emissions not just from the electricity generation but also from the energy sector as a whole, including the transport sector. The LNG to Power IPP Procurement Programme will be conducted within the context of the wider objective of stimulating the exploration for, and production of, indigenous gas; the encouragement of imports from adjacent sources within the SADC region; and the development of gas utilisation in industrial, commercial, transportation and residential sectors.
The Department aims to, through the LNG to Power IPP Programme, develop the gas industry and maximise the socio-economic benefit to South Africa, while also striving to balance this outcome with the country's energy security and diversity requirements. The LNG to Power Programme has been initiated by the Department to achieve the current Determination’s objective of a total of up to 3 000MW of Capacity from the gas-fired power generation facilities.
The DoE conducted different studies within the vicinity of Coega (Ngqura), Richards Bay and Saldanha to assess the viability of development LNG to Power projects in these three ports. The studies indicated that Saldanha Bay requires substantial work not just on the port but on the grid infrastructure, the servitudes for the pipeline and transmission lines and the location for the power plant. Accordingly, the first phase of the programme should focus initially on Coega and Richards Bay whilst Saldanha Bay will fall to the second phase of the programme.
The two projects, in Coega and Richards Bay, will each be linked to a separate RFQ followed by a specific RFP for each Project. In respect of Coega, up to 1 000MW of power generation will be procured and the balance in Richards Bay.
The LNG to Power IPP Programme aims to identify and select successful bidders and enable them to develop, finance, construct and operate a gas-fired power generation plant at each of the two ports, Ngqura and Richards Bay. The successful bidder will also be required to put in place the gas supply chain to fuel the plant with gas from imported LNG. The LNG to Power IPP Programme will provide the anchor gas demand on which LNG import and regasification facilities can be established at the Ports of Ngqura and Richards Bay. This will provide the basis for LNG import, storage and regasification facilities to be put in place that can be available for use by other parties for LNG import and gas utilisation development. Therefore, Third Party Access will be a fundamental aspect of the LNG to Power IPP Programme. This will enable the development of gas demand by third parties and the associated economic development.
The scope of the projects for each port will include:
• LNG procurement and delivery;
• LNG storage and regasification facilities via a FSRU (or equivalent LNG regasification and storage technology);
• Port infrastructure, including fixed maritime structures and modifications;
• Gas transmission pipelines to connect the FSRU (or equivalent LNG regasification and storage technology) with the new power generation facility;
• LNG and or gas distribution hub(s) for third party off take;
• Power plant, including the high voltage connection to the electrical grid; and
• Arrangements for independent delivery of LNG, and the sale of a modest percentage of gas and LNG to external users.
The Preliminary Information Memorandum and the Information Memorandum, released by the Department of Energy at the Gas Options Conference on 3 October 2016, included a procurement timetable. In line with that procurement timetable it was anticipated that the RFQ for the LNG-to-Power IPP procurement programme would be released to the market in November 2016. In the meantime, the Department of Energy has released two important policy planning documents in the energy sector namely, the Integrated Energy Plan and the Integrated Resource Plan ("IRP") on 22 November 2016 and can be found on the website of the Department at http://www.gpwonline.co.za/Gazettes/Gazettes/40445_25-11_NationalGovernment.pdf. Most notably the IRP is the country plan which sets out the electricity supply and demand balance and requirements (including the technologies) from 2020 to 2050. The Department will shortly commence with the public consultation process to solicit comments and thereafter finalise the IRP (by March 2017) for tabling to Cabinet for its approval.
It is important to ensure that there is alignment between the procurement programme and the IRP and therefore, the Department has taken the decision to postpone the release of the RFQ for the LNG-to-Power IPP procurement programme. Further detail and timelines for release of the RFQ with the revised timelines will be communicated on this website in due course.
In the meantime, parties who are interested to participate in the LNG-to-Power IPP procurement programme are at liberty to approach the IPP Office for interactions on both the Preliminary Information Memorandum and the Information Memorandum.
Both the PIM and the detailed Information Memorandum for the LNG to Power IPP Procurement Programme is now available on the following website: https://gaslng.ipp-gas.co.za . When you’ve registered and logged in, the documents can be downloaded from the Documents icon.