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PetroSA Plans S.Africa LNG Terminal of Up to $510 Million

July 18 (Bloomberg) -- PetroSA, the South African state-run oil company, plans to build an import terminal for liquefied natural-gas costing as much as $510 million as it seeks to add to its share of the country’s market for oil and gas products.

“We only have 5 percent of the market and so the strategy is for us to grow to 25 percent,” Thabo Kgogo, vice president of operations, said in an interview. Growth will come from oil and gas output, a refinery, and LNG and its infrastructure, he said. PetroSA will seek strategic partners for its plans.

A design study for the LNG project on the south coast is expected to be ready in September, it said in a statement handed to reporters in Mossel Bay, about 400 kilometers (249 miles) west of Cape Town. A final investment decision is scheduled for the fourth quarter of next year, and the project will be handed over by contractors by the first three months of 2018.

Fields off Mozambique’s Indian Ocean coast are estimated to hold enough gas to meet world demand for two years, with Statoil ASA, Eni SpA and Anadarko Petroleum Corp. owning exploration and production contracts. East African gas discoveries may be used in South Africa to fill a gap in meeting energy demand, PetroSA Chief Executive Officer Nosizwe Nokwe-Macamo said in April.

The initial supply needed would be 1.2 million metric tons of LNG a year, Carlo Matthysen, its LNG project manager, told reporters. PetroSA will issue a gas-supply tender in August or September, with Chevron Corp.’s $10 billion Angola LNG plant among those showing interest in supplying the terminal, he said.

Supplies Needed

PetroSA’s plans may cost $375 million to $510 million depending on the offshore terminal’s configuration, he said.

Ikhwezi, a drilling project, is expected to provide natural gas to the plant until 2019, according to the presentation.

“It is a great time to sign LNG contracts for a start date within the 2017-20 period,” Charles Blanchard, an analyst at Bloomberg New Energy Finance, said by e-mail. The market is tight due to “massive” demand from Japan and because few export projects will come online from until late 2014, he said.

PetroSA has agreed to supply LNG to Eskom Holdings SOC Ltd., the state utility that provides more than 95 percent of South African electricity, for its 740-megawatt Gourikwa station, according to the statement handed to reporters.

PetroSA operates a 45,000-barrel-a-day onshore gas-to-fuel plant at Mossel Bay that’s running at about 50 percent capacity because of lower natural-gas output, Kgogo said. Production will rise when the Ikhwezi project is online, he said.

Fracking Moratorium

South Africa in September lifted a moratorium on hydraulic fracturing, in which water is pumped into shale rock to extract gas, so it can assess an area known as the Karoo. The region of western South Africa may hold 485 trillion cubic feet of shale resources, the U.S. Energy Information Administration says.

Royal Dutch Shell Plc applied to drill 24 exploratory wells in 2011. Permits are unlikely this year because of potential legal appeals, law firm Bowman Gilfillan said in April.

Kgogo said models for developments in the industry include building carried out by a company that has the right to operate a project and charge fees until its investment is recovered. After 10 or 15 years ownership is transferred back, he said.

PetroSA agreed to a framework accord with China Petroleum & Chemical Corp. to build the Mthombo refinery, the companies said in March. A pre-feasibility study calls for the plant to have a capacity of 300,000 barrels a day, according to PetroSA.

To contact the reporter on this story: Paul Burkhardt in Johannesburg at pburkhardt@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

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