Qatar Eyed as LNG Supplier to Prevent South Africa’s Gas Cliff

(Bloomberg) -- Qatar is a leading candidate to supply liquefied natural gas to South Africa as power utility Eskom Holdings SOC Ltd. and Sasol Ltd. collaborate to get the fuel from new sources before its main supply drops off in 2027.  

The Gulf state “is top of the food chain” to sell LNG to Eskom and the chemical and fuel manufacturer due to its rich gas reserves, Electricity and Energy Minister Kgosientsho Ramokgopa said at a briefing in Johannesburg Friday. Qatar — which plans to boost LNG shipments more than 80% by 2030 — has expressed interest to South African President Cyril Ramaphosa in working together, the minister said.

The most industrialized nation on the continent is racing against the clock to source alternative gas supplies as it faces a drop-off when fields in Mozambique operated by Sasol — which ships the fuel by pipeline to South African businesses that support hundreds of thousands of jobs — curb production in 2027.

Sasol and Eskom, the country’s top emitters of greenhouse gases, signed a pact Friday to work toward aggregating gas together. 

“Time is not on our side,” Eskom Chief Executive Officer Dan Marokane said at the briefing. “We understand that — that’s why we are here today.” 

Sasol will be forced to halt supply except for its own operations in mid-2027 and is trying to stretch this to 2028 at the latest, Sasol Chief Executive Officer Simon Baloyi said. 

“Work is aimed at creating space for us to bring LNG, because this gas cannot be expanded indefinitely,” he said.

Ramokgopa called the need to find alternatives “an emergency.”

South Africa’s past plans to buy LNG have raised concerns over pricing as the volatility of the local currency could result in dramatic price swings. There are ideas on how the nation could reduce that risk on a government-to-government level, said Ramokgopa, adding that he’s optimistic about a solution.

“We’ll have to take the appropriate measures in terms of currency protection or hedging,” Baloyi told reporters. 

The utility generating more than 80% of South Africa’s electricity mainly from coal and Sasol, which uses the dirtiest fossil fuel to make its products, each have plans to use more gas to reduce emissions.

Sasol’s emissions for 2024 showed a 5% reduction from the 2017 baseline it references to measure the target, but increased for a second consecutive year. 

Eskom has delayed the decommissioning of some of its old coal stations in order to stabilize supply to the electricity grid. 

For years, almost-daily power cuts plagued the South African economy, disrupting lives, increasing costs for companies and curbing growth. The nation has gone without so-called loadshedding for more than five months.

Eskom expects to avoid electricity shortages over at least the next few months, extending a streak that’s coincided with an operational turnaround, Marokane said last month.

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