The decision was made by the Petroleum Oil and Gas Corporation of SA (PetroSA) and the country’s National Oil Company (NOC), it said in a statement.
The location was found to be technically and commercially problematic, according to a feasibility study.
The study found meteorological and oceanographic conditions in Mossel Bay were severe and increased the logistical and gas supply costs of the project.
PetroSA said it had been investigating the possibility of importing LNG to supplement dwindling gas reserves in Mossel Bay since 2008.
It proposed the importation of LNG into Mossel Bay through a terminal which would float on the ocean.
Natural gas, found underground, is liquefied through a cooling process which makes it easier to store and transport.
The gas is cooled to about -160 Celsius, which shrinks its volume up to 600 times. The liquid is stored and transported by ship to various terminals where it is returned to a gas at a regasification facility and piped to consumers.
PetroSA Group CEO Nosizwe Nokwe-Macamo said the company would explore other location options.
“The good thing about this exercise is that the results of these feasibility studies will be put to good use in other projects in the medium to long-term.”
She said PetroSA had studied the 13 operational FLNG terminals in countries, including Argentina, Brazil, and the United Kingdom.
“The main distinguishing factor between these FLNG terminals and the one that was proposed for Mossel Bay is the fact that all of them are located either in very well-protected ports, very near the shore, or are located on very calm rivers,” she said.