With Sasol’s gas supply ending in 2028, industries face a R500-billion threat. Can the new gas aggregator and private sector funding secure South Africa’s energy future?
By Larry Claasen
The next few months will be critical in the formation of the gas aggregator, the company to be formed by South Africa’s largest gas consumers, as a way to avert the “gas cliff.”
The goal of the gas aggregator is to ensure a continuous supply of gas before Sasol, the monopoly supplier of large-scale natural gas, stops supplying industries by June 2028.
The impact of this cut-off cannot be underestimated as the Industrial Gas Users Association of Southern Africa (IGUA-SA) executive officer Jaco Human says.
South Africa’s gas crisis: 70,000 jobs and R500bn at stake
The inability of IGUA-SA’s members to source gas in time will see industries that directly employ 70 000 people and contribute between R300-billion and R500-billion annually to the economy severely affected.
Sasol says it can bring gas safely into the country from its gas fields in Mozambique up to June 2028, but then the taps will have to be shut off.
“It’s physically impossible to bring in additional gas beyond that point, and we’ll simply be subject to a decline,” Human, speaking at the Africa Energy Indaba, in March.
South Africa’s gas crisis: Government seeks solutions abroad
The gas cliff was also top of mind for the government, with the Electricity and Energy minister, Kgosientsho Ramokgopa, who was also speaking at the same Africa Energy Indaba, saying that after load shedding, it was the second thing that kept him up at night.
“If we don’t do anything of significance in the next two years, the potential of wiping out 5% of the country’s GDP and affect 100 000 jobs.”
Ramokgopa said that was why the government had approached Qatar about securing supply. Though he did not give details on the negotiations, he said “conversations are happening.”
Aside from Qatar, Ramokgopa said the government was also talking to unspecified other parties, to ensure that it gets “the best price.”
He said getting to the correct price point was key because there is a price point that would make it commercially unavailable, even if it managed to secure a supply.
South Africa’s gas crisis: IGUA-SA races against time
Though the government is using its influence to avert the gas cliff, IGUA-SA is not slowing down its efforts to secure its supply. Human said when it came to the creation of the gas aggregator, the shareholder agreement was being finalised and that the board was likely to be appointed by the end of May 2025.
At the same time, the terms sheets for the supply chain were also being concluded.
“It’s not only gas, it’s also gas transportation agreements, it’s capacity reservations and those kinds of things.”
While all this is being done, the final off-take agreements must be concluded by December 2025, which will, in turn, set the timeframe to get things moving.
“This means we will have 30 months to develop the infrastructure. So we are walking a fine line at the moment, as you can imagine,” said Human.
South Africa’s Gas Crisis: Facing a double threat to supply
Aside from the gas cliff, the growing demand for gas is also putting supply under pressure.
The current demand for gas sits at 200 petajoules a year, but demand is expected to at least triple by 2033.
“So, we’re actually sitting with a double whammy. And the whammy here is simply, the double whammy is saying, we need more gas, we don’t have infrastructure, but what we’ve got we’re also going to lose. And therein lies the predicament for South Africa,” said Human
South Africa’s gas crisis: Private sector must step up
One way to ensure supply is to use Sasol’s pipeline in Mozambique to pump gas from a third-party supplier to South Africa. But even if this is done, $610-million will be needed to be invested in Maputo or in Basra, which will be underwritten by the private sector.
Human said having the private sector backing an infrastructure project of this scale is something new for them.
“It’s a big decision and it’s a big mind shift for the private sector to move into a space where traditionally, the government should be playing a role in terms of providing energy security and stability.”
This means aside from the time constraint, ensuring the necessary funding was in place was also a major hurdle.
“So, the problem that we have here is that there are certain risks. The biggest one is time.
The second one is failure to underwrite that particular investment if we can’t find the right solution in terms of the overall transaction.”
But even if the country manages to dodge the gas cliff, it is still behind where it should be said Human, who pointed out that it lagged behind neighbouring countries like Mozambique and Namibia in developing domestic gas resources.
“We see what is happening in Mozambique, we see what is happening in Namibia. And South Africa is probably about 10 to 15 years behind in the development of its own upstream gas resources.”
