Richards Bay: the gateway for Africa’s LNG goldmine

South Africa’s Houston

Originally Written for IOL, Engineering Dissent

South Africa is one of the few countries that developed from the interior towards the coast, with Gauteng’s prosperity built around mining activity, the steady supply of water from Lesotho, and the availability of energy from the rich coal fields of the Mpumalanga and Limpopo provinces.

But there is now a potential to complement the political economy with Liquefied Natural Gas (LNG) as the KwaZulu-Natal (KZN) Provincial Energy Summit approaches.

A good topic for the Economic Development, Tourism & Environmental Affairs MEC, Siboniso Duma, would be to discuss the geopolitical potential of Richards Bay, so that the port city can become South Africa’s Houston.

Liquefied Natural Gas (LNG) that consists primarily of Methane Gas (CH4) is often referred to as The Transition Fuel because of the commodity’s ability to be used as a base-load, mid-merit, and peak saving fuel in electricity generation.

In the first two cases, LNG serves as a backup or complement generation for both for nuclear and coal power, and in the latter, as a peaking gas plant that counteracts the intermittency of solar panels and wind turbines.

The transition term refers to the hope that storage technologies such as pumped hydro, molten salt nuclear, or batteries will become more available within the next decade. LNG acts as the “safety of supply” so that the energy system can be de-carbonised without hindering the prosperity of the poor through high electricity tariffs.

In addition to electricity, methane has other applications such as domestic cooking, home heating, industrial heat, and long-distance transportation (road, rail and waterborne), with the latter providing the potential to lower food prices in the logistics driven economies that are common throughout the African continent.

South Africa should concentrate on developing the import market before domestic extraction, because even though the Karoo holds the seventh largest deposit of natural gas in the world, extraction carries risks if there isn’t an available domestic consumption market.

The LNG market is highly competitive, with more than 40 countries competing for imports and exports, and the sector is unique in the sense that there is no major geopolitical player, such as an “OPEC” or “Saudi Arabia” that can dictate terms or prices. Not even Russia, the US or Qatar – as is often asserted.

South Africa should establish an LNG import facility at Richards Bay that will serve as the technology’s point of entry into Sub-Saharan Africa - based the following pull factors:

– The Karpowerships that act as the first captured market for the investment.

– The available grid capacity at sea level that justifies new LNG power generation.

– TotalEnergie’s $20 billion (R377bn) LNG investment in Mozambique that is estimated to start operation by mid-2025.

– The aluminium smelters that use can LNG for industrial heat.

– The Transnet’s Lilly pipeline that can easily connected to the Rompco pipeline at Secunda through a small 10km extension.

– Once connected, Lilly can be put in duel or reverse flow, and the Secunda Hub can be expanded further into to Gauteng and later serve countries like Botswana and Zimbabwe.

– LNG can decarbonise the South African Trucking Industry with higher efficiencies that results in lower prices for delivered goods.

– The KZN demand for LNG for domestic cooking and heat will grow because the recent trends in “semigration” saw South Africans migrate to coastal areas like Ballito.

– Richards Bay’s role as a coal import hub has the transferable skills that will complement the LNG economy.

– An import facility is justified, given Sasol’s recent announcement that it won’t meet the 2030 gas output at its Secunda refinery in Mpumalanga.

– Government’s estimated 22%-27% shares through the Public Investment Corporation and The Government Employees Pension Fund can act as leverage so that Sasol cannot interfere in a future gas market.

Cecil John Rhodes’s vision of a train line from Cape Town to Cairo, predicated on the false assumption that the railway, in the absence of navigational rivers, would remain Africa’s main source of transport. But the Post-Colonial Period saw his ambition failed, because the automobile became the dominant source of transport on the continent.

South Africa and the larger SADC region was established as a logistics economy, with large trucks transporting freight and volumes over thousands of kilometres every day. The shift to LNG will complement this development without too many disruptions because those trucks can easily be fueled with natural gas instead of diesel.

The local and national government must ensure that all stakeholders in the energy sector, three spheres of government and communities work towards a holistic solution centred around Richards Bay.

LNG is a no-regret strategy as it has the potential to make the poverty-stricken area of KZN join Texas as one of the most dynamic economies in the world.