The year has started out terribly for South Africans. Through ongoing commissions of inquiry, we are being taken witness by witness and page by affidavit page, through harrowing detail of the havoc that corruption and corporate capture has wreaked on our young nation.
This week we were again reminded of the cost that all of this malfeasance has had on one of our most strategic assets: Eskom. The state power utility has been unable to guarantee supply in recent times and the worst was last week, when for the first time since 2010 Eskom elevated its load shedding to stage four.
Eskom itself, according to media reports, burnt through R100million a day in emergency diesel to power up its two open cycle gas turbine stations to supplement the shortage.
All of this and more leads to one thing: South Africa is in desperate need for a “good news” story.
And President Cyril Ramaphosa might have done just that two weeks ago in his State of the Nation Address, when he revealed that French energy giant Total had made a discovery of a large gas field off the coast of South Africa.
The find, which could yield up to 1billion barrels of natural gas condensate, is potentially game changing.
Besides the tax revenue that government will collect from this project, it is the prospect of much-needed employment as well as potentially providing a saving grace to the rapidly declining state petroleum company, PetroSA, that makes us excited about this find.
From an energy perspective, gas provides a cheaper, much cleaner, more bankable, more reliable energy option compared to coal and even diesel.
Eskom’s two open cycle gas turbines (OCGT) power stations, Gourikwa and Ankerlig, could regularly produce up to 2067MW, and if you add the two privately owned OCGT plants, Avon and Dedisa in the Eastern Cape and KwaZulu-Natal, you’re looking at an extra 1000MW.
These diesel-powered power stations are costing the nation an arm and a leg, but if you converted them to cheap gas tomorrow, they could start operating at base load and you could start solving the load shedding problem.
But South Africans will have to be measured and realistic in their hunt for good news, when considering that this find might take at least 10 years before Total may be in a position to take its gas to market.
The company has indicated that it still needs to do studies and drill four boreholes, which means that the figure of 1billion barrels could change significantly and make doubtful the commercial viability.
If you consider that the area is a gas province, the likelihood is they will find something.
The studies and drilling alone could take anything up to six years, and then one might as well set aside an additional two years for field development plans and environmental impact assessments. Once those are concluded, Total will need to secure Petroleum Agency of South Africa licensing and procurement processes will more than likely add another two to three years to this.
Mozambique, which is sitting on 170trillion cubic feet of natural gas - the top 10 deposits in the world - has still not been able to sell a single drop of gas.
Some of the gas has already been sold off to takers and the only thing left now is construction and sale to the various customers. The earliest project is expected to sell liquefied natural gas (LNG) into the market in 2023.
So, properly considered, what this news can do is have the effect of negatively swaying the positive solutions that need to be implemented now.
PetroSA needs feedstock now, not in three, five, or 10 years. Have we considered the socio-economic consequences of closing down the Mossgas refinery? We have load shedding now. Through the four OCGT stations, you’ve got a combined 3GW of power that you could put into the grid base load immediately and solve the crisis now.
The solution is needed now. And that is through LNG.
The advent of shale gas in the US has meant that one can buy gas at a Henry Hub price of $2.62 (R38) per GJ, liquefy it and ship it at a cost-effective base into South Africa, including the ancillary infrastructure needed.
The applications of LNG are limitless and solutions vary from the transport sector, where the price of fuel is a major cost driver, to powering industry all with the added benefit of lower greenhouse gas emissions.
The practical examples are there, as one of the pioneer companies providing this energy solution, DNG Energy, has already started introducing new efficiencies and energy reliability to one of the mines in the Northern Cape, where it is displacing all diesel use, as well as to a Johannesburg-based logistics company.
As a product, gas in a liquefied form does not require further investment in time and money to construct pipelines. One could easily distribute it via available rail networks not only throughout South Africa, but all the way to the end in southern Democratic Republic of Congo.
This then allows you to reduce the effective input costs into mining - which is fuel - in Zambia and Kolwesi in the DRC.
As a yet uncharted terrain, a gas industry presents an opportunity to unlock billions of rands in investment, create new jobs, and could help create a new cohort of black players in the industry without having to do an empowerment deal. You start transforming the energy security of the countries and break the dynamic of countries like South Africa being beholden to global oil giants.
The added extra benefit of LNG is the guaranteed security of supply as opposed to piped natural gas, which allows you to get into take of pay supply agreements as opposed to customers now who view energy supply as a major risk.
Mbalati is the chief executive of DNG Energy, a South African company bringing liquefied natural gas solutions to industries throughout Africa.