Vested interests are lobbying for gas as a transition fuel despite its many economic, logistical, and environmental risks.
South Africa is immersed in a "just energy transition" from a fossil fuel-based energy system to a cleaner, low-carbon energy system. This new system will be based primarily on renewable energy, such as solar, wind, and green hydrogen.
Such a transition is deeply contested. Those with direct and indirect commercial interests in the coal industry will defend their stake. On the other hand, those who could gain from a transition will aim to entrench their new interests in the renewable energy sector.
Then there are those who argue that gas is a reasonable compromise between the need to decarbonise and the need to maintain energy security.
Lobbyists for gas include the Industrial Gas Users Association, the South African Oil and Gas Alliance, and state-owned energy company Eskom. Sasol, the South African energy and chemicals company, has also been heavily involved in lobbying for gas. It already operates gas-to-liquids plants and has a vested interest in expanding the gas market to support its industrial processes.
The case for gas hinges on it being ostensibly "cleaner" and more cost effective. Gas is also said to support grid reliability when there is peak demand for energy. (This is at times when inclement weather conditions means solar power cannot be generated.)
A recent Cambridge University foresight paper authored by Sikho Luthango concludes that gas carbon emissions are lower than coal. But gas is not as clean as alternative renewable energy sources. Moreover, pursuing large-scale gas development could result in stranded assets.
This could happen because of a global shift towards renewables and green hydrogen. South Africa has a competitive advantage in green hydrogen and renewable energy technologies due to its location and natural resources. If green hydrogen was prioritised, it could attract significant global investment. South Africa could become a market leader. Green hydrogen, combined with lithium production, could create up to 94,000 jobs, far surpassing potential employment in the gas sector.
South Africa's gas supply
On 20 September 2024, Eskom and Sasol signed a memorandum of understanding to explore and research potential future liquefied natural gas requirements.
However, South Africa's gas supply is under question. In July 2024, French multinational energy giant TotalEnergies pulled out of drilling for gas in the Brulpadda-Luiperd gas condensate fields on the south coast of South Africa. Complex conditions, including deep water and fast ocean currents, made the project financially unviable for the South African market. And the minister of petroleum and energy resources, Gwede Mantashe, is eager to investigate whether the inland Karoo Basin has commercially viable oil and gas reserves.
Regardless, South Africa would likely need to import gas from Mozambique. Yet, with violent extremism near the Pande-Temane gas field in southern Mozambique, gas could be used as a geopolitical weapon. South Africa would be unwise to depend on another country for supply.
Either way, gas is neither a clean energy nor a smarter alternative to coal. Methane leaks along the full supply chain of the gas industry are underplayed. South Africa has committed to meet the Paris Agreement goals and phase out all greenhouse gas emissions by 2050. Gas projects already in operation (or those in construction or exploration) will still be pumping out greenhouse gases by 2050. This is inconsistent with the Paris Agreement.
Besides, the European Union's carbon border adjustments and climate neutrality targets will punish carbon emissions. This will be felt across the whole supply chain of South Africa's export industries. It will affect sectors from agriculture to car manufacturing to minerals and metals production. South Africa also lacks demand for gas. A new market would have to be created, requiring large infrastructure investment.
There are other risks. Without strong governance and institutional capacity, oil and gas projects do not always benefit the people of a gas-rich country. Despite Mozambique's potential gas revenues, worth $100-120 million up to 2040, poverty rates have remained the same.
What needs to happen next
South Africa's Presidential Climate Commission was set up in 2020 to facilitate a "just" transition away from fossil fuels. It has suggested that rapidly building renewable energy with large storage systems is the best way forward.
The Commission says gas may play a role in the short to medium term to support renewable energy at times of peak demand. But it has also warned that using gas for peaking power will have significant cost implications. By contrast, renewable energy technologies paired with storage solutions, like batteries, could serve as a more cost-effective and sustainable alternative to gas for peaking power. The same research found that the Integrated Resource Plan may have underestimated the future costs of gas (including infrastructure and volatile fuel prices) and advocates for renewable energy over gas due to these uncertainties.
Despite this, the government's national energy plan, the 2023 Integrated Resource Plan, envisages a far bigger role for gas in South Africa's future energy mix. South Africa needs to heed the Presidential Climate Commission's advice and focus on setting up large scale renewable energy projects.
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If South Africa's government insists on "going gas", it should join over 100 countries that have signed the Global Methane Pledge to reduce methane gas emissions by 30% by 2030. If goes this path, it should also ensure that phase-in targets are used for green hydrogen so that the infrastructure is built in such a way that it can also be used for green hydrogen. That way, stranded assets and wasted investment can be avoided.
Lastly, South Africa should join the Extractive Industries Transparency Initiative, which promotes open and accountable management of oil, gas and minerals, as well as the infrastructure transparency initiative CoST, which promotes transparency around huge infrastructure that often leads to corruption. This will be important in setting up a smart mix of voluntary and binding mechanisms for transparency and accountability.
Insights for this article were gathered from key industry and government stakeholders through deliberations hosted by the Corporate Affairs Leadership Forum. This article is republished from The Conversation under a Creative Commons license. Read the original article.
