ANC Seeks South Africa Oil Law Clarity to Ease Energy Crisis

Updated on
  • Ruling party sees gas as unique opportunity amid power crunch
  • McKinsey says gas can bridge energy gap between 2020 and 2030

South Africa’s ruling African National Congress urged the government to approve planned changes to oil and gas laws to help speed up investment that can help resolve power shortages.

Companies won’t spend on drilling exploration wells unless there’s an “enabling environment,” which includes clarity of the legislation governing the industry, Enoch Godongwana, chairman of the ANC’s economic transformation committee, said in an opinion article published in the Johannesburg-based Business Report on Tuesday. Policy certainty can help unlock investment in gas projects to ease South Africa’s energy crisis, he said.

Lawmakers are yet to revise amendments to the 2002 Mineral and Petroleum Resources Development Act after President Jacob Zuma sent changes to the law back to parliament in January, concerned that they may breach constitutional rules. The bill included proposals to give the state a free 20 percent stake in all new oil and natural-gas projects and the option to buy an unspecified additional share at an “agreed price.”

South Africa has the potential to install as much as 20 gigawatts of gas-fired plants by 2030 to reduce reliance on coal-based generation if there’s certainty about the regulations, Godongwana said. While Eskom Holdings SOC Ltd., the state-owned power utility, is building new capacity to alleviate current shortages, more shortfalls are expected between 2025 and 2030, Godongwana said.

Energy Deficit

McKinsey & Co. echoed those comments in a report released on Tuesday, saying power from natural gas can bridge a power shortage that’s likely to occur between 2020 and 2030.

“Neither coal nor nuclear energy is likely to be available in time to address the capacity crunch,” McKinsey said. “South Africa must consider and pursue a mix of supply options to ensure its energy security.”

Africa’s most industrialized economy is struggling to deal with a power crisis that has curbed economic growth to 1.5 percent last year, the slowest pace since the 2009 recession. Gross domestic product fell for the first time in more than a year in the second quarter, declining an annualized 1.3 percent from the previous three months.

“South Africa’s electricity shortages continue to constrain growth,” Godongwana said. “The potential oil and gas discoveries present the democratic government with a unique and historic opportunity.”

The bulk of the country’s power is generated by coal, with the government seeking to add 9,600 megawatts of nuclear power to the national grid to meet future demand. The natural gas market is currently supplied by Sasol Ltd., which imports natural gas from the Pande and Temane fields in Mozambique, and by PetroSA, which taps gas fields on the country’s south coast. The central Karoo region is estimated to have recoverable shale gas reserves of as much as 390 trillion cubic feet.