DoE opts for integrated model for highly anticipated gas-to-power roll-out

South Africa’s Department of Energy (DoE) has opted for an integrated delivery model for the country’s highly anticipated Liquefied Natural Gas Independent Power Producer Procurement Programme (LNG IPPPP), which will be initially deployed at Richards Bay, in KwaZulu-Natal, and Coega, in the Eastern Cape.

Both sites are associated with deep-water harbours, with Coega surrounding South Africa’s newest harbour, known as Ngqura. Sites at the deep-water harbour of Saldanha Bay, in the Western Cape, have also been assessed, but will not be included in the initial phase, owing to inadequate port and transmission infrastructure.

In a project information memorandum released this week, the DoE indicated that separate procurement processes would be undertaken for each site, with a request for qualifications (RFQ) scheduled for release in November.

The projects are to be developed by private sector special purpose vehicles, which will be responsible for the design, development and financing of the marine- and land-based infrastructure, including the supply of the LNG.

The DoE has not prescribed the use of a floating storage regasification unit (FSRU) as initially mooted, saying only that the successful bidder can use an FSRU, or an equivalent LNG regasification and storage technology.

Besides storage and regasification, successful bidders would also be required to:
• Procure and deliver the LNG.
• Build port infrastructure, including fixed maritime structures and modifications.
• Establish gas transmission pipelines to connect the FSRU or equivalent solution with the new power generation facility.
• Set up LNG and or gas distribution hubs for third-party offtake.
• Develop the power plants, including the high-voltage connection to the electrical grid.
• And make arrangements for independent delivery of LNG, and the sale of some gas to external users.

Following the RFQ phase, prequalified bidders will be provided with a request for proposals (RFP), together with a full suite of project agreements, to prepare binding offers. The DoE is hoping to identify the prequalified bidders and issue the RFP in April 2017.

“After the process of engagement, the DoE will issue the final RFP, on the basis of which bidders will submit their bid responses,” the memorandum states, indicating that the final RFP will be in August next year.

The gas-to-power programme is being facilitated by Ministerial determinations for 3 726 MW of gas-fired power, of which 3 000 MW has been allocated to the LNG IPPPP and 726 MW to separate programmes, including 600 MW for a public-private gas-fired power plant and 126 MW for a domestic gas programme.

As with the successful Renewable Energy Independent Power Producer Procurement Programme, Eskom is designated as the single buyer of the electricity produced.

Energy Minister Tina Joemat-Pettersson, who unveiled the LNG IPPPP a day after delaying the issuance of a nuclear RFP, says the programme is designed to provide imported LNG as a base to trigger exploration as well as upstream development and the reindustrialization of the economy.

“It is expected to build significant anchor gas demand in the South African economy, while indigenous and/or more regional gas supply is being developed, and over time supplement imported LNG,” she writes in the memorandum.