South Africa’s supply of natural gas is set to plunge within the next three to four years and there’s a risk of a shortfall triggering the country’s next economic crisis, the head of an industry body warned.
With Sasol set to curb production of the fuel from its fields in Mozambique between 2026 and 2027 as reserves dwindle and retain more output for its own operations, 300 000 to 400 000 jobs at firms that use gas for industrial purposes are endangered, said James Mackay, CEO of the Energy Council of South Africa.
“We have a supply cliff coming,” Mackay, whose organisation represents companies including Sasol and Glencore, said in an interview on Thursday. “There isn’t currently a supply alternative that will readily be available in the time frames needed.”
A gas supply crunch would be another impediment to growth in the economy caused by inadequate state planning. The country experiences almost daily power outages because of inadequate generation capacity and its ports and freight rail network are crumbling because of a lack of investment and maintenance.
“We do need a national focus on saying where that supply will come from and there are a number of opportunities,” Mackay said.
Gas could be imported through a port in Mozambique or facilities could be speedily erected at South African harbours such as Richards Bay or Coega, he said. By 2030, a gas field discovered off the west coast by TotalEnergies could be in operation.
“We have a bit of a policy vacuum around how to deliver this energy transition and this supply problem,” he said. “This is not about policy direction, it’s really about execution, fast-tracking implementation, making decisions and making sure that policy is converted into very clear regulatory environments where we need investment decisions made.”
Collapse of state capacity
The collapse of state capacity in South Africa over the last 15 years in terms of everything from electricity provision to port efficiency has cost the country 40% of its growth, Harvard University researchers said in a report released on Wednesday.
“That’s the level of clarity we need to get to very, very quickly in order to avert a supply crisis in the natural gas space,” Mackay said. “We still have time, we can get it done, but we’ve got to move very quickly.”
The country is also seeing a decline in the amount of petrol and diesel it can refine as its processing plants close, but its needs can be met with imports, he said. — (c) 2023 Bloomberg LP