Unlocking LNG imports for South Africa

LNG Terminal investment needs to make financial sense

South Africa lags behind global trends that place natural gas as representing 25.1% of the world’s Total Energy Supply (TES) and Gas to Power (GTP) generation at 22%. In South Africa, both statistics are very different with the percentage for TES sitting at 3.3% while no GTP generation is recorded on the power grid.

The core reason for this stark contrast between South Africa and the world is two-fold. Firstly, according to the Energy Institute, coal remains the major contributor to the country’s energy supply representing 73% of the total. Secondly, geologically, South Africa has not had historically ready access to natural gas, compared to say the United State of America (USA) or Nigeria.

While South Africa has traditionally had some access to Methane Rich Gas (MRG) produced as a by-product of Sasol’s coal to liquids production, this position changed in 2004 when Sasol started started to transport Mozambique’s onshore natural gas (from the Pande Temane fields) through the 865km Republic of Mozambique Pipeline Investments Company (ROMPCO) pipeline to Secunda. 

Although the gas was primarily for Sasol’s own use in its Secunda and Sasolburg complexes, over the years some 40 Petajoules (PJ) of natural gas has been made available for third parties.

The Pande Temane’s gas production, however, is now facing an organic decline. Currently Sasol is scheduled to cease the third-party sale of natural gas and MRG in June 2030 – a date that is associated with what has become known as the “gas cliff”. Without an alternative supply source, multiple local businesses will be affected and potentially thousands of jobs could be lost.

Occurring in parallel with this looming challenge is the understanding that the bulk of Eskom’s generating capacity in respect of coal-fired power stations that came online in the 1980s, will also begin to reach the end of their operating life from 2030 onwards. This severe reduction in South Africa’s available electricity generation is known as the “power cliff”.  

It is against this backdrop that the argument for improving the country’s capacity for LNG imports exists. The aim is to sole the challenges posed by the gas and power cliffs and boost energy security for businesses and households. It is anticipated that the use of LNG in the power sector is likely to be cheaper than diesel-fired generation.

Import Terminals

The real ability to import LNG, however, does not currently exist in any substantial capacity. Although the two LNG terminals are in advanced development, the country does not yet have an operating terminal at any of its ports.

Signed in December 2024, the 25-year concession to operate a LNG Terminal in the Port of Richards Bay has attracted a reported R3 billion in investment. An initial projected throughput of two million tons per annum (mtpa) is set to reach over five mtpa over the concession period. The Zululand Energy Terminal (ZET), a joint venture between Vopak, Reatile and Transnet, will operate a Floating Storage Regasification Unit (FSRU) which in time will be supplemented by a 4.5 mpta storage tank. 

In a project sponsored by Gigajoule and TotalEnergies, the Matola Floating Storage and Regasification Unit (FSRU) in southern Mozambique, is targeted to send its natural gas through the existing ROMPCO pipeline. 

Both projects are expected to take Final Investment Decision (FID) in the second half of 2027.  Elsewhere, LNG import terminals are also being developed for the Port of Ngqura by the Central Energy Fund as well as in the Port of Durban by the Vitol Group. The possibility of an additional import terminal at the Port of Saldanha Bay has also been raised.

A terminal business case

A new LNG import terminal is argued to broadly require around two mtpa of LNG purchases to make business sense to its investors. As such, South Africa’s existing gas market is insufficient to support two new terminals. 

Accordingly, the Integrated Resources Plan 2025 (IRP) envisages the building of 6 GW of GTP by 2030 and 17 GW by 2039.  This is needed not just to replace the retiring Eskom capacity, but also to support the significant Gigawatts of new Variable Renewable Electricity (VRE) capacity being built.

The first key demand source is the 2 GW GTP programme promoted by the Department of Energy & Electricity, for which 2.8 GW of GTP capacity from four bids was submitted on 29th May.  It is understood that two bids are set to source their gas from Matola and two from ZET.

In broad numbers these developments, alongside other planned sources, would satisfy an FID in 2027. In addition, the planned Eskom build of 3 GW of GTP at Richards Bay would further support the business case for ZET.

The successful development of these projects as well as additional ancillary projects would suggest a cumulative LNG/Gas/GTP investment requirement of around US$ 7.5 billion.

This will be a major contribution to the country’s capital formation from 2027, with most of the investment expected to come from private sources.  Shortly afterwards, Eskom’s first phase of Richards Bay GTP could take FID.  Assuming a 1 GW development, this could be another USD 2bn, making an overall investment requirement of around US$ 9-10bn.

Based on current commitments as of July 2026, the building blocks for LNG imports are starting to fall into place. 

Multi-purpose terminal concession issued SOS for a sailing stalwart