Further engagement required for building local gas economy – consultancy

The successful establishment of a natural gas economy in South Africa – which has significant gas resources – requires the addressing of associated challenges and the implementation of policies that promote investment in the sector, says research and strategy firm Birguid senior associate Patience Panashe.

Panashe describes the Gas Master Plan, published in 2021 by the Department of Mineral Resources and Energy, as a significant step towards the development of the natural gas industry in South Africa that could help the country diversify its energy mix while reducing its reliance on coal and other fossil fuels.

She says the plan provides a clear framework for the development of a gas value chain – which includes the exploration, production, transmission and distribution of natural gas – and will help to create a stable investment environment and ensure compliance with environmental and safety regulations.

Moreover, the strategic roadmap for coordinating investment and implementing gas-related projects will ensure that South Africa maximises the benefits of its natural gas resources. The collective participation of the public and private sectors could also prompt investment into technologies and expertise required for the development of a local gas economy.

“Feasibility is contingent on the availability of liquefied natural gas and the infrastructure to distribute and store it. South Africa has significant natural gas reserves, primarily located offshore along its southern coast. The country will, however, require extensive infrastructure to support the development of a natural gas industry.”

Panashe highlights concerns over how the infrastructure needed to transport and store gas will be financed. She notes that the lack of investment in gas infrastructure negatively impacts the transportation, distribution and storage of gas between suppliers and end-users.

The local gas sector will, therefore, impact South Africa’s Budget, owing to new infrastructure being introduced.

Further, while gas projects may benefit South Africa’s economy to a certain extent, she says the majority of lower income citizens are unlikely to benefit. This means that regulatory and policy challenges need to be addressed to ensure that a stable and predictable regulatory framework for the natural gas industry is established.

This framework would include regulations related to gas exploration, production, transportation and distribution, while ensuring that the frameworks are dependable and conducive to investment.

Moreover, Panashe highlights concerns related to the investment and development of a gas economy contradicting South Africa’s Climate Change Bill and undermining the urgency of a Just Energy Transition and the Global Methane Pledge adopted at the 2021 United Nations Climate Conference of the Parties, or COP26.

Hence, she says the distribution of economic benefits and environmental considerations should be considered before establishing a gas economy.

“The development of gas in South Africa will perpetuate our fossil fuel dependence and slow a Just Energy Transition; the Gas Master Plan fails to reference the National Environmental Management Act (Nema) regarding certain important provisions.

“It is important that the Gas Master Plan speaks to the Nema, owing to the impact of gas and gas pipelines on the environment. Gas development is not compatible with a just, fair, equitable and decarbonised energy future in South Africa where people are able to contribute to, and benefit from, the means of energy production and distribution,” warns Panashe.

She also alerts to the need to address how communities will be compensated when land needs to be expropriated to build pipelines.

“The Gas Master Plan does not speak to how families and communities will be compensated in cases of land acquisition for pipeline expansion, especially when families might be vulnerable.

“The local community must, therefore, be consulted and engaged in the planning and development of a local gas economy. It is important to address any concerns or issues raised by the community to ensure that the project is socially acceptable and sustainable in the long term,” concludes Panashe.