Options for gas to power in South Africa

Options for gas to power in South Africa

Nicholas NewmanEnergy SpecialistNicnewmanoxford.comJanuary 201616/01/2016nicnewmanoxford.com1

Table of contents16/01/2016nicnewmanoxford.com2IntroThe power problemA gas solution?Sources of gasThe where, what and why? Conclusion

2Nicholas Newman 2015Options for gas power in Soto Africa

Intro

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Introduction16/01/2016nicnewmanoxford.com4South Africas is facing ongoing power supply problems.At present power supplies are tight causing load shedding at timesProblems being experienced in building new generating and distribution capacity to meet ongoing growth in demand.New build gas to power is seen as one of the solutions to tackle South Africas power issues. This presentation look at some of the issues being considered.

The power problemState of Power SectorPower Sector in CrisisNew Build Plans16/01/2016nicnewmanoxford.com5

State of power sector16/01/2016nicnewmanoxford.com6

Eskom expects to have 53,600 megawatts (MW) on the grid by 2025 compared with close to 45,000 MW at present. Eskom plans to build 10,000 kms of high-voltage lines.Forecasts of South Africas rising population, increased living standards and industrialisation, together with the closure of 6 to 10 GW of life- expired coal plants, indicate a power gap of between 10 to 15 GW by 2025 in the country.Transmission upgrades to 2025 seen costing $16 bn.

Eskom is scrambling to keep lights on (Recasts with 10-year plan).

South Africa Power Sector in crisis16/01/2016nicnewmanoxford.com7For much of 2015, Eskom had to resort to periodic rolling power cuts to prevent the grid from collapsing, a state of affairs that contributed to a 1.3 percent contraction in the economy in the second quarter.South Africas power system is extremely constrained and vulnerable, owing to deteriorating, underserviced power plants and delays in the completion of major new power stations.

New build plans16/01/2016nicnewmanoxford.com8SA plans to add an initial of 3.1 GW using LNG FSRU gas to power technology to existing 1.35 GW of gas generation of to justify the huge costs in building the gas infrastructure from scratch. 2010 -2030 expects the imported gas to meet 6% of all new generation capacity an OCGTs 8%Renewable energy expected to provide 18.2 GW of new build, about 42% of new build

A gas solution?Gas to Power OptionsWhy Gas is NeededAdvantages of Gas GenerationIn Terms of ConstructionSome Gas Facts16/01/2016nicnewmanoxford.com9

Gas to power options16/01/2016nicnewmanoxford.com10Gas engines are reciprocating machines withtypically higher simple cycle efficiencies than gas turbinesTypical power ranges from 10 kW (13 hp) to 4,000 kW (5,364 hp)Gas turbines can be >375MW (open cycle)With high exhaust temperatures turbines can havevery high combined cycle efficiencies 60%

McKinseys big gas approach proposes that the countrys demand in 2030 could comprise 12 GW of renewable energy and 23 GW of gas-based power, amounting to 1.04-trillion cubic feet of gasMcKinsey estimates that rising demand and the closure 14.4 GW of ageing power-generation infrastructure that will be decommissioned after 2020, will result in a a power gap of 6 GW to 10 GW will have emerged by 2025

16/01/2016nicnewmanoxford.com11Why Gas Is Needed!

TechnologyWell provenVery high combined cycle efficiency (60% or more)Modular (easily scalable)Multiple experienced equipment vendorsConstructabilityShort construction periods (18 months from FID for gas engines, 24 30 months for gas turbine packages)Standardised packages available

16/01/2016nicnewmanoxford.com12Advantages of gas generation

OperationDispatch able power quick ramp-up ratesCan be turned on and off relatively quickly to compensate for fluctuations in renewable-energy supplyLoad followingReduced CO2Less than half the CO2 emissions compared to coal-fired generation

16/01/2016nicnewmanoxford.com13Advantages of gas generation

In terms Of Construction16/01/2016nicnewmanoxford.com14There are a number of other advantages of gas power generation, compared with nuclear or coal power generation, including:Lower initial capital expense of developing gas power- generation facilitiesfaster lead times gas power-generation facilities need just two to four years from conception to construction, owing to their modular nature.

General approximate natural gas pipeline flows80mmscf/d ~ 30PJ/a ~ 0.8tcf over 25 years30PJ/a will support about 550MW for 8000 h/aGeneral approximate LNG conversion factors1 tonne LNG ~ 2.5m3 LNG ~ 48.6 GJ900MW (@58% LHV eff) needs about 1Mt/a LNG or ~ 50PJ gas (for 8000h/a)

16/01/2016nicnewmanoxford.com15Some gas facts

Sources of gasPipeline ImportsLNG ImportsCoal Bed MethaneNew Natural Gas Field16/01/2016nicnewmanoxford.com16

Where will South Africa get its gas?16/01/2016nicnewmanoxford.com17By pipelinesouthern Mozambique gas reservesSome existing gas is already piped in via the gas fields at Pande and Temane in Mozambique to Secunda in Johannesburg in South AfricaThe pipeline has a peak capacity of 524 million cubic feet per day of gas.Upgrade in capacity to double by 2017Piped gas already provides about 3% of South Africas total installed power output of 45,645 MW

Where will south Africa get its gas?16/01/2016nicnewmanoxford.com18By pipelinenorthern MozambiqueRovuma gas finds off Northern Mozambique coastline are in excess of 30tcfProposed 2,600km plus pipeline linking Northern Mozambique to Johannesburg in South AfricaAt an estimated cost of $6 billion plus, with possible construction start 2017 or 2018. Challenge to achieve sufficient utilisation in early years to justify investment?

What is the extent of the reserves, and can they be extracted?What is the cost of production?What are the water and other environmental issues?When will enough be known about these issues so that their potential for large scale power generation can be assessed? When can we bank on this option?

16/01/2016nicnewmanoxford.com19domestic shale gas many unknowns

Shale Gas 16/01/2016nicnewmanoxford.com20South Africa is ranked between fourth and eighth for shale gas exploration potential with ~390 tcf of recoverable resource. The Petroleum Agency of South Africa estimates the recoverable resource to be ~30 tcf.

coal bed methane - CBM16/01/2016nicnewmanoxford.com21Coalbed methane reserves in South AfricaLephalale/Waterberg: ~1 TcfSpringbok Flats: ~ 5 Tcf GIP prospective resourcesTuli & Soutpansberg sub-basinsNorthern coalfieldsSA CBM Prospective Resources gas in place(P50) estimated more than 5 TcfNeed to understand more about costs & availability

New Gas Field16/01/2016nicnewmanoxford.com22In 2013 Sunbird Energy agreed to supply Eskom gas from its Ibhubaesi gas field with 30-bcf of gas per year for up to 15 years.Ibhubesi is anticipated to produce about 28.3 bcf of gas annually over its estimated field life of 20 years from 2017 onwards.The first gas is expected to reach Eskom 1,300MW Ankerlig power station in Atlantis from 2018 onwards.Also provide gas for other power plants

Offshore gas Many unknowns16/01/2016nicnewmanoxford.com23Orange Basin:Best estimated gas reserves in place = 22,5 TcfSouth coast gas comprising the Bredasdorp, Pletmos, Gamtoos, Algoa and Southern Quteniqua sub-basins:Best estimated gas reserves in place = 19,4 TcfEast Coast GasDurban and Zululand basinsProspective P50 estimated gas reserves in place = 4 Tcf

LNG imports16/01/2016nicnewmanoxford.com24By LNG tankerImporting LNG removes the reserve and related risks associated with the other gas sourcesLocating a floating or onshore LNG import terminal provides flexibility for South AfricaAn import terminal will cost much less than a pipeline from northern MozambiqueImport capacity can be increased over time as power demand increases

LNG imports16/01/2016nicnewmanoxford.com25By LNG tankerLNG imports will require long-term contractual commitmentsLNG producers need firm offtake to reward large upstream & liquefaction plant capital investmentsLNG is priced in dollars and linked to other gas pricesPower generation could provide an anchor offtake to justify initial LNG investment

The where, what and why? Proposed Sites For LNG PortThe Merits of Each PortCould Gas Provide A Large Portion Of SA Power Proposed Plans For FLNGProject bankability question16/01/2016nicnewmanoxford.com26

Proposed Sites for lng fsru16/01/2016nicnewmanoxford.com27options for meeting short-term demand is:floating or onshore LNG import terminals at one or more of the following ports on mapwith LNG re-gasifiers linked by pipelines to local power plants owned by Eskom and Independent Power Producers, plus local industry and cities.

The merits of each proposed port16/01/2016nicnewmanoxford.com28Coega is the only one that has been deemed unsuitable for an FSRU because the turning circle is too tight, but it could support an onshore terminal. Richards Bay is the only port that already has a gas demand base, albeit a low one. At Saldanha and East London a gas industry and demand will need to be built from scratch.

Proposed plans For FLNG announced 16/01/2016nicnewmanoxford.com29SASOL is working with ESKOM to create a PPP funding model, to provide a floating LNG terminal, at Saldanha in the Western Cape.The gas from the FLNG facility is planned to provide additional supplies to Eskoms Ankerlig and Gourikwa power plants when they are converted from diesel 2016 and 2018 when the plants will undergo scheduled major outages, according to Eskom.As well as provide additional gas supplies for new gas powered IPPs in the area.LNG sources likely to be sourced from US or Middle East

Options to supply grid scale power16/01/2016nicnewmanoxford.com30Need to balance issues such as:Gas prices and linkagesImpact on economy etc.

Options to supply grid scale power16/01/2016nicnewmanoxford.com31Need to balance issues such as:Most likely GW-scale options appear to beDomestic shale gasPipeline imports from northern MozambiqueLNG importsAll have different risks & implications

Some of the criteria to be considered:

The Power Purchase Agreement (PPA) and Grid Connection Agreements.Location, grid capacity issuesCompliance with the Department of Energy (DoE)s non-price stipulations for localisation, percentage of local equipment, and Black Economic Empowerment etc.

Environmental requirements and approvals.16/01/2016nicnewmanoxford.com32Project bankability question

ConclusionUpdate January 201616/01/2016nicnewmanoxford.com33

South Africa is likely to opt for an integrated LNG-to-power solution for its 3.1 GW gas-fired independent power producer (IPP) tender to streamline development of the countrys nascent gas industry."If its not a bundled approach, there will be very clear reason why its not," Karen Breytenbach, head of the IPP department, The Department of Energys request for information (RFI) regarding the tender had yielded 170 submissions by the time it closed on 20 July 2015, approximately half of which showed a willingness to work on the project on an integrated basis. Around 100 of the submissions focused on importing gas.16/01/2016nicnewmanoxford.com34Update January 2016

The request for qualifications for the mid- and long-term gas-fired programme will be released before the end of the year. The request for proposals (RFP) will be published in Q2 2016.The IPP department will launch the RFP for short-term power solutions which will include floating barges as well as alternative supply options, such as underground coal gasification and CBM before the end of 2015.16/01/2016nicnewmanoxford.com35Update January 2016

Thanks for readingSources: Author, ESKOM, IPP Office, Department of Energy South Africa, Engineering News, Oil and Gas Journal, Transnet, Petro SA, Standard Bank, Statistics South Africa, African Review, Oil Review Africa16/01/2016nicnewmanoxford.com36For more information contact: energy specialist Nicholas Newmanhttp://www.nicnewmanoxford.com/