SA has ‘four months’ to avoid a natural gas Day Zero as Sasol contract supply crisis looms

Industrial gas users said South Africa’s government is not heeding its repeated warnings about the worst-case scenario in which the country runs out of natural gas by June 2026, when petrochemicals manufacturer Sasol will stop supplying the resource from Mozambique.

The gas users have also accused the government of not moving fast enough to resolve the looming crisis.

The halt of gas supplies to South Africa will have dire consequences as the resource is estimated to support as many as 70,000 jobs and contributes up to R500-billion a year to the domestic economy.

Gas is used by industries including steel, chemicals, glass, food and others in Gauteng, Free State, KwaZulu-Natal and Mpumalanga.

A Day Zero — a situation in which South Africa runs out of gas — will also impact individuals and businesses, said the Industrial Gas Users’ Association of Southern Africa (Igua-SA), which represents industrial gas users such as Consol Glass, Illovo, Nampak, Mondi, ArcelorMittal, South32, South African Breweries and Coca-Cola. These companies depend on uninterrupted gas supplies for their operations.

Igua-SA said some 400 smaller to medium-sized businesses, several hospitals and roughly 8,000 households will also be directly impacted by the disruption in gas supplies.

Jaco Human, executive director of Igua-SA, said businesses will be forced to switch to fuels “which are more expensive and more environmentally damaging, with repercussions for consumer pricing and carbon emissions”.

Warnings 

Igua-SA had been warning the government about the looming gas shortages for at least six years, to no avail.

Although Sasol’s contract with Mozambique’s government ends in 2026, Human said South Africa has only four months to put in place measures to ensure gas supplies are not disrupted.

Although 2026 may seem relatively far off, gas pipelines and other infrastructure will have to be built and commissioned in the coming months so that the flow of gas begins to yield benefits.

“We are sitting with a supply-demand deficit. No gas infrastructure developments have been built for many years. There are dwindling gas supplies from Sasol.

“Despite continuous engagements, we have not seen any movement from the government on investments and policy direction to address the problem,” said Human during a media briefing on Tuesday.

Sasol is considered to have a monopoly on the supply of natural gas to users in KwaZulu-Natal, Mpumalanga and Gauteng.

In the early 2000s, Sasol entered into a contract with the governments of Mozambique and South Africa to explore the Pande and Temane gas fields.

Sasol sources gas from these fields and transports it via the Republic of Mozambique Pipeline Investments Company (Rompco) pipeline.

The company also supplies gas from its plant in Secunda to KwaZulu-Natal and Mpumalanga via the Lilly and SWM pipelines.

In August 2023, Sasol informed the industry that its supply of gas would be suspended by June 2026 because the gas fields were drying up.

Human said there were no confirmed supply solutions that would come on-stream early enough to act as a sufficient source of independent supply.

Although there are major gas developments underway in Namibia and other parts of Mozambique, it will take time to secure offtake and supply agreements with these countries to avoid a Day Zero scenario.

There are also infrastructure limitations as infrastructure needs to be expanded to link gas from Namibia and other parts of Mozambique to South Africa’s gas nodes such as Gauteng.

There are similar infrastructure limitations that stand in the way of Total’s recent gas discovery at the Brulpadda and Luiperd prospects off the Southern Cape coast.

Igua-SA has proposed several measures that could reduce the likelihood of Day Zero. These include:

• The government in South Africa, in line with its existing policies, to urgently establish sufficient gas-to-power capacity on the Rompco pipeline to increase the demand for gas energy by 40-60PJ (petajoules), which will render gas-receiving infrastructure investment in Matola, Mozambique, economically feasible;
• Eskom, as part of its short-term power purchase programme, to increase power availability, procure additional electricity from planned gas-to-power developments in Mozambique, and also render gas-receiving infrastructure investment in Matola economically feasible through increased gas volume throughputs;
• The government ensures that the Rompco and Lilly pipelines are linked before 2026 to provide gas energy security for KwaZulu-Natal;
• The government provides financial guarantees to underwrite the investment in gas-receiving infrastructure in Matola to ensure the economic sustainability of the South African manufacturing sector; and
• Sasol to embark on a reasonable, phased reduction of supply, which could be gradually offset by increased reliance on other sources, instead of a unilaterally imposed hard cut-off of gas. DM