In that regard, the two firms, which are the largest coal users in South Africa, signed a memorandum of understanding in Johannesburg on Friday with the support of South Africa’s Minister of Electricity and Energy, Kgosientsho Ramokgopa.

“The collaboration aims to determine the potential volumes that South Africa requires to establish a viable LNG import market along with the enabling infrastructure, and will be facilitated by government-to-government relations where necessary,” the two firms said in a joint statement.

This initiative focuses on using gas for power generation to provide essential base load electricity, as the gas supplies decline.

The partners said it positions gas as a “key enabler” of re-industrialisation while also ensuring continued supply to the market by unlocking global LNG resources.

Furthermore, the collaboration will contribute to enhancing South Africa’s energy mix and enable the country’s energy transition and decarbonization, they said.

Aligned to the gas master plan, the MoU will explore sourcing gas within South Africa, the Southern African Development Community (SADC) region, and other parts of the African continent, in addition to evaluating long-term LNG contracting.

This will support the gas requirements for Eskom’s planned coal power station repowering and conversion to gas in the long term, they said.

The partners said they will also engage other state entities to enable an LNG value chain in South Africa.

Cost, Qatar

Speaking about the agreement and LNG supplies during the signing ceremony, Ramokgopa said the issue is the cost of LNG, but “if you’re able to aggregate demand that will have an impact on the cost of the molecule and that’s why it is important that Sasol and Escom enter into this MoU.”

“We think that with the government-to-government level, we can negotiate better,” he said.

Ramokgopa said he would enter into government-to-government negotiations “with one of the countries that is providing LNG.”

He revealed later during the ceremony that Qatar is a top candidate from which South Africa could buy LNG.

“Qatar is top of the food chain because of the historic relations that Sasol enjoys with Qatar, and also the amount of reserves that they have,” he said.

QatarEnergy is currently working on the giant North Field LNG expansion program, which includes the North Field South and North Field West projects. Together, these will raise Qatar’s LNG production capacity from the current 77 mtpa to 142 mtpa in 2030.​

In February, QatarEnergy also announced the North Field West project which will add 16 mtpa of LNG to the overall expansion of the North Field.

Richards Bay

Ramokgopa also discussed the regasification infrastructure, as South Africa currently has no LNG import terminals.

“The shortest path to ensuring that we are able to access the molecule is still Mozambique because there’s existing infrastructure and the Rompco pipeline,” he said.

“So it is important that we are able to use the existing infrastructure,” he said.

In addition, “it is important that we build our facility at Richards Bay,” he said.

“To this end, we are having a conversation with the Ministry of Transport and Transnet to ensure that we are able to accelerate the infrastructure at Richards Bay, ” he said.

Ramokgopa did not provide further details.

Ealrier this year, Dutch terminal operator Vopak and its partner Transnet Pipelines were testing the market’s interest in regasification and storage capacity at their planned LNG terminal in South Africa’s Richards Bay.

According to the two firms, the first phase of the LNG terminal includes a floating storage unit (FSU) of at least 135,000 cbm and an onshore regasification system with an indicative capacity of 2 mtpa, or about 300 mmscfd.

The planning basis is targeting the commercial operations date (COD) in 2027.