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THE race for gas, especially in light of Eskom’s woes, is intensifying, but it’s still a steep climb before we start to see any real benefit as consumers. Minister of Mineral Resources Gwede Mantashe firmly reinforced, at the recent Africa Oil and Power 2019 expo held in Cape Town, that Coega Port will be the new entry point for natural gas in the form of LNG (Liquefied Natural Gas) coming into the country. The announcement means that the guessing is officially over for the private sector and infrastructural development and gas projects should ideally be directed to Port Elizabeth and surrounding areas. The location will have gas to power projects while some new and some of the existing diesel power plants will be converted into gas-to power plants. Coega Port will also be used as a base for importing fuel stock for Petro SA. And so, the challenge has been put out to investors. Currently, natural gas contributes around 3% of our total energy mix. With the correct frameworks, we could see more than 15% of our energy coming from natural gas. That’s in excess of R75 billion. And with the stakes so high, just who are the players in this great race for gas? Transnet, with no natural gas experience or expertise, appears to be a forerunner, having already kicked off the feasibility, funded by the World Bank, for the multibillion rand project. The focus here however, is on Richards Bay and Maputo – not Coega.
Interestingly, one of their major competitors is also a state-owned entity – Central Energy Fund’s I-Gas or South African Gas Development Company. The rationale behind two SOEs pursuing natural gas in contradictory terms begs questions, especially since the government ought to be aligned in their operations. With the president recently denouncing any privatisation of Eskom, this does not bode well for transparency and other issues weighing the utility down. Now, with two state-owned entities geared for LNG, concern has been raised regarding competitiveness in the gas sector. Aldworth Mbalati, chief executive of major LNG player Delta Natural Gas (DNG), said that the private sector brings efficiency of service and capital allocation. “SOEs have shown a chronic level of under-performance. South Africa needs energy security in order for the new dawn to be realised and we believe that the LNG initiative should be handled by the private sector, which has up-to-date experience,” he said. SOEs should be cautious about controlling the entire value chain, which will, based on history, prevent competitive private sector engagements.
SOEs have a reputation of slower rates of implementation based on speed of execution of procurement and construction. SOEs should rather focus on developing the key distribution and transmission infrastructure that is required to move molecules of natural gas across our country, and let the private sector get involved in the fuel sourcing race. This will drive entrepreneurship and businesses and ultimately create more jobs in a healthy competitive market, which will attract further investment. It is clear that government should focus on ensuring monopolies for critical fuel sources are not allowed again. With access to the railway system, natural gas can be transported in LNG iso-containers to any point across the country via rail and road. Ultimately, natural gas has the potential to bring Africa out of the darkness, but only through a collaborative and sincere approach. It is time we looked beyond our individual pockets as Africans and rather focused on building a United States of Africa.