As South Africa's National Oil Company, PetroSA has a responsibility to secure the country's energy supply and sustaining operations at its GTL refinery at Mossel Bay is fundamental to achieving this vital objective. With sustainability in mind, the company is developing plans to import liquefied natural gas (LNG) into Mossel Bay.
These plans took a significant step forward in March 2012, when PetroSA's Executive Committee (EXCO) approved the execution of Feasibility & Front-End Engineering Design (FEED) for the importation process. This approval followed a pre-feasibility study which indicated that importing LNG to supply the GTL refinery and Eskom's Gourikwa power plant is technically and commercially feasible. By the end of 2013, work on the next stage in the development process was under way with the drafting of a scoping report.
Although no plans have been finalised, PetroSA's LNG initiative certainly comes at a crucial time for the company – and South Africa.
PetroSA is currently experiencing a critical decline in the supply of indigenous gas feedstock to its GTL refinery. The business has responded by implementing various short-term initiatives to keep the facility operating. Project Ikhwezi, for example, is expected to keep its feedstock supplies flowing until 2020. But, given the facility's long-term strategic and commercial importance, PetroSA must explore alternative options – such as importing LNG.
This option offers a number of important advantages. For start, supply risks are relatively low. With new reserves from countries such as Australia, Angola and Mozambique coming on-stream, global LNG stocks are expected to remain abundant until 2030, at least. As worldwide demand for LNG grows, the risk of high prices becomes greater. But, supplying gas to Eskom will raise the volume of LNG that PetroSA imports. This, in turn, will help to maximise economies of scale and offset the risk of escalating prices.
PetroSA's plans align directly with the South African Government's long-term energy strategy. The Department of Energy's Integrated Resource Plan (IRP 2010) positions gas as a key source of new electricity, with at least 2.4GW (or 6% of new capacity) expected to come from gas-fired combined cycle generators. The key reason for this policy is LNG's green credentials. Other factors include the relatively short lead times involved in taking new generators from construction to production plus the flexibility of gas power stations.
Currently, Eskom produces around 2GW from diesel-operated power plants. As relatively inefficient open cycle plants, they are expensive to operate and will not help Eskom to lose its tag as the country’s largest greenhouse gases emitter.