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SA picks ports for R50.42bn gas infrastructure

Johannesburg - South Africa will invest R50.42bn at the ports of Richards Bay and Coega to build infrastructure for a gas-to-power programme aimed at easing the country’s dependence on coal.

A plant at Richards Bay will generate 2 000 megawatts of electricity from liquefied natural gas imports, with another 1 000 megawatts at the Coega industrial development zone, the Department of Energy said in a memorandum on Monday.

The government will seek bidders to manage the project, underpinned by a power-purchase agreement between the winning applicant and state electricity utility Eskom Holdings.

The programme, which coincides with low LNG prices, will create wider opportunities for chemical industry and domestic applications, Trade and Industry Minister Rob Davies told investors at a conference in Cape Town.

Apart from the 3 000 megawatts generated at the ports, another 600 megawatts will come from the appointment of a strategic partner for a gas-fired plant and a further 126 megawatts is allocated to a domestic gas program.

Richards Bay initially will require 1 million tonnes a year of LNG and Coega 600 000 tonnes a year, Karen Breytenbach, head of Independent Power Producers Procurement Program Office, told reporters on Tuesday.

The ports will each require R25bn in infrastructure, she said. The program is looking to hedge the LNG, which is priced in dollars.

Demand for LNG throughout the country could increase to more than 10 million tons a year after a decade, according to studies by the Department of Energy. That includes long-term demand in KwaZulu-Natal province of 3.1 million tonnes, Eastern Cape at 3.9 million tonnes, with the addition of a gas market in Gauteng, Mpumalanga and Free State of 3.2 million tonnes.

"The program is designed to ensure that the LNG import and regasification facilities are complementary to the development of indigenous gas and/or development of a regional gas pipeline network," the department said.

Pipeline network

South Africa’s existing pipeline infrastructure is limited, with Johannesburg-based Sasol using a link to import gas from Mozambique to Gauteng province. Another line was constructed to pipe gas to the steel industry and to markets in Richards Bay and Durban.

The term of a power-purchase agreement with Eskom for the projects is anticipated to be 20 years from the commercial operation date, according to the memorandum. Prequalification for the program will be announced in April, after bidders make submissions in February.

The final request for proposals is expected in August, the Energy Department said.

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