Department of Energy announce that South Africa will invest over R50 billion into gas power infrastructure in Richards Bay and Coega, as part of its plan to reduce dependency on coal.
The government will seek bidders to manage the projects, underpinned by a 20-year power-purchase agreement with Eskom.
A plant at Richards Bay will generate 2,000MW of electricity from liquefied natural gas (LNG) imports and the one at Coega industrial development zone will produce 1,000MW.
SA formed a gas industrialisation unit in May to implement its 3,726MW gas-to-power programme after blackouts last year curbed growth when there was a risk of recession. By starting to import LNG, the government can take advantage of low gas prices while reducing reliance on coal.
Richards Bay will initially require about a million tons of LNG and Coega 600,000 tons a year, Karen Breytenbach, head of the Independent Power Producer Procurement Programme’s office, said on Tuesday in Cape Town. The ports each needed R25bn in infrastructure, she said. The programme is intended to hedge the cost of the LNG, priced in dollars. The power cost of the power will be paid by consumers through electricity tariffs.
Vessels offshore would receive, convert and store LNG imports, avoiding the risk of gas plants becoming “stranded assets” if SA started producing its own gas, Breytenbach said. It was quicker to use marine facilities, but onshore plants could follow if needed, she said.
SA’s ability to transport gas overland is limited by poor pipeline infrastructure, but LNG can be sent by road and rail as a “temporary solution,” according to the Energy Department.
The gas-to-power programme was meant to ensure LNG import and regasification facilities complemented the development of indigenous gas and/or development of a regional gas pipeline network, the department said.
Bidders to manage the port projects will be prequalified in April after making submissions in February. The final request for proposals is expected next August, according to the department.
Apart from the 3,000MW generated at the ports, the programme would produce a further 726MW from other projects.