Industry organisation the Industrial Gas Users Association – Southern Africa (IGUA-SA) has called for urgent intervention by the Presidency to place the creation of gas midstream infrastructure back on track in South Africa.

Not one of the four bids met the mandatory criteria under bid window one of the Gas Independent Power Producer Procurement Programme (GASIPPPP) and no preferred bidders were appointed. One of the main reasons given by the Department of Electricity and Energy was that bidders could not provide the required assurances of gas supply.

Bidders could not secure gas because the terminals do not exist, and the terminals will not be built without committed demand. The plan to use gas-to-power to provide the anchor demand that import terminals need to reach investment decisions has failed, the association says.

South Africa needs a dedicated focus on gas midstream infrastructure. It must build the gas infrastructure and not expect a power programme to deliver it by default.

Government has known about the gas cliff for years and has yet to take a decision that puts import infrastructure on track, IGUA-SA states.

“The four bids submitted offered 2 830 MW capacity against government’s target of 2 000 MW, which shows that the market has the appetite. The failure was caused by the inappropriate commercial structuring of the gas-to-power bids,” says IGUA-SA executive officer Jaco Human.

Further, industry confirmed in September that South Africa is already in gas cliff territory.

Supply to industry from Mozambique’s Pande-Temane fields ends in June 2028, and Sasol’s methane-rich gas is due to end in June 2030.

About 300 industrial users depend on gas. The industries that run on gas account for 8% of national output, R700-billion a year and 75 000 direct jobs.

Further consultation and another announcement before year-end will not deliver gas to a single user by 2030, Human emphasises.

The delay exposes government’s lack of an integrated gas policy and a coordinated solution for midstream infrastructure. Government cannot solve the gas cliff by rolling out gas-to-power projects, he says.

Unworkable procurement requirements, including forcing liquefied natural gas suppliers to assume project risks beyond their control, have compounded the problem, he adds.

“We cannot pivot electricity generation towards gas and renewables without securing the gas supply to make that transition work. Upstream, midstream and downstream must move in lockstep, all at once.

“This requires urgent Presidential intervention and coordination across the entire gas value chain. Government must align upstream gas development, midstream infrastructure development and demand sequencing, in meaningful partnership with industry,” says Human.

IGUA-SA and its members are ready to help shape the solutions and to do the work needed to deliver them, he adds.