KPMG’s energy economist, Dr Requier Wait, says that South Africa is in a good position to adopt liquefied natural gas (LNG) into its energy mix to reduce reliance on coal-fired power.
The high dependency on coal, around 95% of the country’s power generation, results in high carbon dioxide (CO2) emissions, which means pressure is placed on the country to adopt cleaner solutions, Engineering News reported.
LNG demand on the rise
According to Wait, despite there being a global slowdown in economic activity, global LNG supply has increased, owing to a surge in supply projects approved before the drop in the price of gas in 2014.
“On the demand side, gas-fired power provides an off-take for gas. For example, the US had a 19% increase in gas-fired power in 2015,” Wait explained.
He added: “The increase was supported by low gas prices, increased gas-fired generation capacity and retirements of some coal-fired plants.”
In South Africa, Wait suggests that the inclusion of gas will assist to support existing and new renewable power, steering toward a cleaner generation mix, Engineering News reported.
Wait predicts that the increased use of LNG in different markets worldwide could lead to gas becoming a commodity like oil because of its ease of accessibility, media reported.
Wait explains that the increased ease of transporting LNG has led to its being used in different markets, such as Japan, South Korea, China and Taiwan. Engineering News reports that these countries collectively account for almost two-thirds of global LNG imports.
Commercial viability in SSA
According to recent BMI research, Ivory Coast, Ghana and South Africa have been identified as the most promising African regions for commercial LNG developments.
The research report highlighted that due to many African countries having limited domestic consumption and infrastructure, integrated LNG-to-power projects would be an anchor for wider demand creation, Business Day Live reported last week.
“In the face of reduced off-take from traditional buyers” in northeast Asia, sub-Saharan Africa held potential as a new market.
“Government support through pricing and off-take agreements is crucial for long-term gas import growth,” BMI noted.