Russian company a favourite to score SA gas aggregator tender – report

South Africa’s thirst to boost the gas component of its diversified energy package may soon be tinged with a controversial international element in the midst of war.

In February, the Central Energy Fund (CEF) released a tender looking for a gas aggregator, an entity able to consolidate gas demand and supply liquefied natural gas (LNG).

And according to a report by amaBhungane, the top two front-runners are state-owned Azerbaijan oil company SOCAR, and Gazprombank, owned by Russia’s state-owned natural gas supplier Gazprom.

The reason for the tender is to ensure gas supply for Nqura in the Eastern Cape, to support the development of the planned Coega LNG Terminal Project.

It is also aimed at bolstering support for the Department of Mineral Resources and Energy’s (DMRE) gas-to-power programme.

According to the tender, the average gas demand could be in excess of 200 thousand standard cubic feet (Mscf) per day, to be managed through multi-billion rand contracts.

NOW READ: Objecting to oil, gas exploration a ‘special type of colonialism’, says Mantashe

Too much uncertainty?

The CEF conceded its lack of knowledge when it came to trading gas.

“There is an acknowledgement of a lack of capacity, systems and processes. There is also an appreciation of the Gas Supply Agreements’ complexity as they can be multi-year and multi-billion contracts with material risks.”

This is why the CEF is willing to let the gas aggregator lead the way in terms of drafting and lodging permit, licence and regulatory approvals, and assisting with a gas pricing mechanism, among other duties.

amaBhungane reports scepticism in the market, with some worried that natural gas volumes will never be supplied to projects.

Others warn giving a private, international company, that happens to be of Russian descent, that much power when it comes to the country’s energy generation could be dangerous.

But potential gas aggregators are reportedly not put off.

Gazprombank told amaBhungane it was evaluating participation in the tender, and that negotiations were ongoing.

Karpowership is also listed as one of the CEF’s future gas aggregator’s customers, despite the 450 megawatt project being refused environmental authorisation.

And although Gazprombank is one of very few Russian state-owned entities not to be sanctioned following Russia’s invasion of Ukraine, amaBhungane reports the geopolitical risks such a deal could pose for South Africa are numerous.

The request for proposal was issued two weeks before the current conflict in Ukraine, which amaBhungane reports puts the entire natural gas sector at significant risk.

On Sunday, Reuters reported Gazprom was still continue to supply natural gas to Europe via Ukraine.

Natural gas prices continue to soar as the war rages on, pushing the envelope dangerously close to becoming more of a cost liability than an asset when it comes to stabilising the country’s ailing national grid.

ALSO READ: Karpowership: Energy diversification or setting of table for comrades to eat?

Gas for economic power

DMRE Minister Gwede Mantashe said at the National Energy Dialogue last month that discoverying new gas fields forms “a vital element in the government’s energy transition strategy”.

“Instead of shutting down offshore exploration… the business and economic case needs to be better made, more often and with real passion.

“Let the environmentalists protest, chant, and agitate. They have many valid arguments that can and must be considered when the pros and cons of economic activity are weighed up.

“But we cannot allow them to dominate to the detriment of the majority, especially those whose agendas are explicitly anti-growth and anti-employment”.

Mantashe said gas was a “catalyst for industrialisation”, with plans that 3 000 megawatts of gas power will be allocated as part of the country’s 2019 Integrated Resource Plan (IRP) between now and 2030.  

During the South African Oil and Gas Alliance Conference in September last year, CEF Group CEO Dr Ishmael Poolo said South Africa could potentially be harbouring 25 trillion cubic feet (tcf) and nine billion barrels (bbls) of prospective oil and gas resources on the south coast, 27 tcf and 11 billion bbls on the west coast, and 8 tcf and 2 billion bbls on the east coast.

Since December last year, at least two seismic surveys, along the Wild Coast and in the Western Cape, have been blocked by environmental organisations.

A new battle looms for organisations after news emerged a 2D and 3D offshore seismic survey had been authorised in the Northern Cape.

NOW READ: Nersa approves licenses for three controversial floating power plants

Compiled by Nica Richards.