Options for gas to power in South Africa

Options for gas to power in South
Africa
Nicholas Newman
Energy Specialist
Nicnewmanoxford.com
January 2016
16/01/2016nicnewmanoxford.com 1

Table of contents
 Intro
 The power problem
 A gas solution?
 Sources of gas
 The where, what and
why?
 Conclusion

Intro

Introduction
 South Africa’s is facing ongoing
power supply problems.
 At present power supplies are tight
causing load shedding at times
 Problems being experienced in
building new generating and
distribution capacity to meet
ongoing growth in demand.
 New build gas to power is seen as
one of the solutions to tackle South
Africa’s power issues.
 This presentation look at some of
the issues being considered.

The power problem
State of Power Sector
Power Sector in Crisis
New Build Plans

State of power sector
 Eskom expects to have 53,600
megawatts (MW) on the grid by 2025
compared with close to 45,000 MW at
present.
 Eskom plans to build 10,000 kms of high-
voltage lines.
 Forecasts of South Africa’s rising
population, increased living standards
and industrialisation, together with the
closure of 6 to 10 GW of life- expired coal
plants, indicate a power gap of between
10 to 15 GW by 2025 in the country.
 Transmission upgrades to 2025 seen
costing $16 bn.
 Eskom is scrambling to keep lights on
(Recasts with 10-year plan).

South Africa Power Sector in crisis
 For much of 2015, Eskom had to
resort to periodic rolling power
cuts to prevent the grid from
collapsing, a state of affairs that
contributed to a 1.3 percent
contraction in the economy in
the second quarter.
 South Africa’s power system is
extremely constrained and
vulnerable, owing to
deteriorating, underserviced
power plants and delays in the
completion of major new power
stations.

New build plans
 SA plans to add an initial of 3.1 GW
using LNG FSRU gas to power
technology to existing 1.35 GW of
gas generation of to justify the huge
costs in building the gas
infrastructure from scratch.
 2010 -2030 expects the imported gas
to meet 6% of all new generation
capacity an OCGT’s 8%
 Renewable energy expected to
provide 18.2 GW of new build, about
42% of new build

A gas solution?
Gas to Power Options
Why Gas is Needed
Advantages of Gas Generation
In Terms of Construction
Some Gas Facts

Gas to power options
 Gas engines are reciprocating
machines with
 typically higher simple cycle
efficiencies than gas turbines
 Typical power ranges from 10 kW
(13 hp) to 4,000 kW (5,364 hp)
 Gas turbines can be >375MW
(open cycle)
 With high exhaust temperatures
turbines can have
 very high combined cycle
efficiencies – 60%

 McKinsey’s ‘big gas’ approach proposes that the
country’s demand in 2030 could comprise 12 GW of
renewable energy and 23 GW of gas-based power,
amounting to 1.04-trillion cubic feet of gas
 McKinsey estimates that rising demand and the
closure 14.4 GW of ageing power-generation
infrastructure that will be decommissioned after
2020, will result in a a power gap of 6 GW to 10 GW
will have emerged by 2025
Why Gas Is Needed!

 Technology
 Well proven
 Very high combined cycle efficiency (60% or more)
 Modular (easily scalable)
 Multiple experienced equipment vendors
 Constructability
 Short construction periods (18 months from FID for gas
engines, 24 – 30 months for gas turbine packages)
 Standardised packages available
Advantages of gas generation

 Operation
 Dispatch able power – quick ramp-up rates
 Can be turned on and off relatively quickly to
compensate for fluctuations in renewable-energy supply
 Load following
 Reduced CO2
 Less than half the CO2 emissions compared to coal-fired
generation
Advantages of gas generation

In terms Of Construction
 There are a number of other
advantages of gas power
generation, compared with
nuclear or coal power
generation, including:
 Lower initial capital expense of
developing gas power-
generation facilities
 faster lead times – gas power-
generation facilities need just
two to four years from
conception to construction,
owing to their modular nature.

 General approximate natural gas pipeline flows
 80mmscf/d ~ 30PJ/a ~ 0.8tcf over 25 years
 30PJ/a will support about 550MW for 8000 h/a
 General approximate LNG conversion factors
 1 tonne LNG ~ 2.5m3 LNG ~ 48.6 GJ
 900MW (@58% LHV eff) needs about 1Mt/a LNG or ~
50PJ gas (for 8000h/a)
Some gas facts

Sources of gas
Pipeline Imports
LNG Imports
Coal Bed Methane
New Natural Gas Field

Where will South Africa get its gas?
 By pipeline
 southern Mozambique gas
reserves
 Some existing gas is already
piped in via the gas fields at
Pande and Temane in
Mozambique to Secunda in
Johannesburg in South Africa
 The pipeline has a peak capacity
of 524 million cubic feet per day
of gas.
 Upgrade in capacity to double
by 2017
 Piped gas already provides
about 3% of South Africa’s total
installed power output of
45,645 MW

Where will south Africa get its gas?
 By pipeline
 northern Mozambique
 Rovuma gas finds off Northern
Mozambique coastline are in
excess of 30tcf
 Proposed 2,600km plus pipeline
linking Northern Mozambique
to Johannesburg in South
Africa
 At an estimated cost of $6
billion plus, with possible
construction start 2017 or 2018.
Challenge to achieve sufficient
utilisation in early years to
justify investment?

 What is the extent of the reserves, and can they be
extracted?
 What is the cost of production?
 What are the water and other environmental issues?
 When will enough be known about these issues so
that their potential for large scale power generation
can be assessed?
 When can we bank on this option?
domestic shale gas – many unknowns

Shale Gas
 South Africa is ranked
between fourth and eighth
for shale gas exploration
potential with ~390 tcf of
recoverable resource.
 The Petroleum Agency of
South Africa estimates the
recoverable resource to be
~30 tcf.

coal bed methane - CBM
 Coalbed methane reserves in
South Africa
 Lephalale/Waterberg: ~1 Tcf
 Springbok Flats: ~ 5 Tcf GIP
prospective resources
 Tuli & Soutpansberg sub-basins
 Northern coalfields
 SA CBM Prospective Resources
gas in place
 (P50) estimated more than 5 Tcf
 Need to understand more about
costs & availability

New Gas Field
 In 2013 Sunbird Energy agreed to
supply Eskom gas from its Ibhubaesi
gas field with 30-bcf of gas per year
for up to 15 years.
 Ibhubesi is anticipated to produce
about 28.3 bcf of gas annually over
its estimated field life of 20 years
from 2017 onwards.
 The first gas is expected to reach
Eskom 1,300MW Ankerlig power
station in Atlantis from 2018
onwards.
 Also provide gas for other power
plants

Offshore gas – Many unknowns
 Orange Basin:
 Best estimated gas reserves in
place = 22,5 Tcf
 South coast gas comprising the
Bredasdorp, Pletmos, Gamtoos,
Algoa and Southern Quteniqua
sub-basins:
 Best estimated gas reserves in
place = 19,4 Tcf
 East Coast Gas
 Durban and Zululand basins
 Prospective P50 estimated gas
reserves in place = 4 Tcf

LNG imports
 By LNG tanker
 Importing LNG removes the
reserve and related risks
associated with the other gas
sources
 Locating a floating or onshore
LNG import terminal provides
flexibility for South Africa
 An import terminal will cost
much less than a pipeline from
northern Mozambique
 Import capacity can be increased
over time as power demand
increases

LNG imports
 By LNG tanker
 LNG imports will require long-
term contractual
commitments
 LNG producers need firm
offtake to reward large
upstream & liquefaction plant
capital investments
 LNG is priced in dollars and
linked to other gas prices
 Power generation could
provide an anchor offtake to
justify initial LNG investment

The where, what and why?
Proposed Sites For LNG Port
The Merits of Each Port
Could Gas Provide A Large Portion Of SA Power
Proposed Plans For FLNG
Project bankability question

Proposed Sites for lng fsru
 options for meeting short-
term demand is:
 floating or onshore LNG
import terminals at one or
more of the following ports
on map
 with LNG re-gasifiers linked
by pipelines to local power
plants owned by Eskom and
Independent Power
Producers, plus local
industry and cities.

The merits of each proposed port
 Coega is the only one that
has been deemed
unsuitable for an FSRU
because the turning circle
is too tight, but it could
support an onshore
terminal.
 Richards Bay is the only
port that already has a
gas demand base, albeit a
low one.
 At Saldanha and East
London a gas industry
and demand will need to
be built from scratch.

Proposed plans For FLNG announced
 SASOL is working with ESKOM to
create a PPP funding model, to
provide a floating LNG terminal,
at Saldanha in the Western Cape.
 The gas from the FLNG facility is
planned to provide additional
supplies to Eskom’s Ankerlig and
Gourikwa power plants when
they are converted from diesel
2016 and 2018 when the plants
will undergo scheduled major
outages, according to Eskom.
 As well as provide additional gas
supplies for new gas powered
IPPs in the area.
 LNG sources likely to be sourced
from US or Middle East

Options to supply grid scale power
 Need to balance issues
such as:
 Gas prices and linkages
 Impact on economy etc.

Options to supply grid scale power
 Need to balance issues such
as:
 Most likely GW-scale
options appear to be
 Domestic shale gas
 Pipeline imports from
northern Mozambique
 LNG imports
 All have different risks &
implications

 Some of the criteria to be considered:
 The Power Purchase Agreement (PPA) and Grid Connection
Agreements.
 Location, grid capacity issues
 Compliance with the Department of Energy (DoE)’s non-price
stipulations for localisation, percentage of local equipment,
and Black Economic Empowerment etc.
 Environmental requirements and approvals.
Project bankability question

Conclusion
Update January 2016

 South Africa is likely to opt for an integrated LNG-to-power
solution for its 3.1 GW gas-fired independent power producer
(IPP) tender to streamline development of the country’s nascent
gas industry.
 "If it’s not a bundled approach, there will be very clear reason
why it’s not," Karen Breytenbach, head of the IPP department,
 The Department of Energy’s request for information (RFI)
regarding the tender had yielded 170 submissions by the time it
closed on 20 July 2015, approximately half of which showed a
willingness to work on the project on an integrated basis.
Around 100 of the submissions focused on importing gas.
Update January 2016

 The request for qualifications for the mid- and long-
term gas-fired programme will be released before the
end of the year. The request for proposals (RFP) will
be published in Q2 2016.
 The IPP department will launch the RFP for short-
term power solutions – which will include floating
barges as well as alternative supply options, such as
underground coal gasification and CBM – before the
end of 2015.
Update January 2016

Thanks for reading
Sources: Author, ESKOM, IPP Office, Department of Energy South Africa, Engineering News, Oil and
Gas Journal, Transnet, Petro SA, Standard Bank, Statistics South Africa, African Review, Oil Review
Africa
For more information contact:
• energy specialist Nicholas Newman
• http://www.nicnewmanoxford.com/

Options for gas to power in South Africa

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