Gas, Private Sector and Free Market Investments Crucial for South Africa to Address Electricity Crisis

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  • Gas, Private Sector and Free Market Investments Crucial for South Africa to Address Electricity Crisis

South African President H.E Cyril Ramaphosa has declared a National State of Disaster over the Southern African country’s electricity crisis during the State of the Nation Address held in Cape Town on February 9.

Measures set to be introduced to reform the electricity crisis during the National State of Disaster will include the introduction of a new Ministry of Electricity in the Presidency to oversee the revitalization of Eskom’s operations and the country’s generation capacity.

The African Energy Chamber (AEC), as the voice of the African energy sector, supports the President’s commitment to address the country’s electricity crisis but massive reforms from an investment and policy perspective need to be implemented to restore confidence among local, regional and global businesses for them to invest in the country’s energy sector.

With consumers in Africa’s third-largest, most industrialized and technologically advanced economy witnessing more than eight hours of blackouts per day, the AEC strongly recommends President Ramaphosa and the South African Government to accelerate the country’s gas agenda, as both a short- and long-term strategy to alleviate the looming electricity crisis.

South Africa’s gas reserves are immense and remain untapped, with massive discoveries including TotalEnergies’ Brulpadda and Luiperd prospects containing combined reserves of 3.4 trillion cubic feet of gas and 192 million barrels of gas condensate. With TotalEnergies having applied for a production license to develop gas fields offshore South Africa, the Chamber is calling for the government to fast-track the permit approval and kickstart the country’s journey towards energy resilience and security.

Massive projects such as Gigajoule’s $550-million Matola Liquefied Natural Gas Project in Mozambique, which will supply South Africa with gas; the 865-km Rompco Gas Pipeline from Mozambique to South Africa; and Renergen’s Virginia LNG project in South Africa are crucial and need to be fast-tracked.

Meanwhile, capital spending in global upstream oil and gas projects will record a 10% increase in 2023 compared to 2022 levels, according to Wood Mackenzie. The sizable potential of new and large-scale gas discoveries across South Africa’s hydrocarbon-rich Orange Basin presents an ideal opportunity for the country to capitalize on this investment momentum and attract interest from international explorers.

While the so-called environmental lobbyists try to block efforts by Shell to unlock South Africa’s upstream potential, the AEC believes more oil and gas exploration is key to ending the electricity crisis, and as such, is strongly advocating for South Africa to create an enabling environment for more oil and gas exploration to take place.

Furthermore, while South Africa has been proficient at leveraging private-public sector partnerships to date, now more than ever is the time for the government to drive more private sector participation in the financing, development and rollout of domestic gas infrastructure – both to facilitate LNG imports from neighboring producers like Mozambique, Equatorial Guinea and the Republic of the Congo, as well as harness its own reserves. The Chamber believes free markets and private sector investments are vital to address the South African energy crisis. 

While the impacts of the electricity crisis are significant, with the South African economy losing up to R900 million per day due to load shedding, coal has a crucial role to play in stabilizing the country’s energy sector and business environment. We believe more coal power generation and the rejuvenation of existing coal facilities, while accelerating renewable energy deployment, is essential to end the electricity crisis.

“South Africa should be careful about demonizing its domestic oil and gas resources. The war against fossil fuels needs to come to an end if we are to address South Africa’s electricity crisis. More oil and gas exploration, development and exploitation remains key if South Africa is to achieve energy security and economic growth. Government should fast track permit approvals for more drilling, seismic surveys, pipeline developments, as well as for new LNG terminals to be constructed,” stated NJ Ayuk, the Executive Chairman of the AEC.

In this regard, with African energy stakeholders meeting with European investors at the upcoming Invest in African Energy Frankfurt Reception – organized by the AEC and taking place at Frankfurter Botschaft in Germany on February 23 – South Africa’s energy policymakers, investors and project developers will have a strategic opportunity to showcase the country’s gas market potential.

Moreover, South Africa will host the African Energy Week 2023 Conference & Exhibition – Africa’s premier event for the energy sector, taking place on October 16 – 20 in Cape Town – which will unite regional and global energy leaders, decision-makers and financiers to explore investment opportunities across the country’s entire natural gas value chain. 

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