Picture: THINKSTOCK
Picture: THINKSTOCK

DEVELOPING its own natural shale and offshore gas resources will be South Africa’s best long-term energy option, but building liquefied natural gas (LNG) terminals would be the quickest and cheapest way to develop the gas market, according to Shell South Africa Energy’s LNG market access manager John Shoobridge.

"The potential to use gas for energy in South Africa is tremendous," Mr Shoobridge on Wednesday told a Fossil Fuel Foundation conference on gas as a game-changer for South Africa.

Paul Eardley-Taylor of Standard Bank’s oil and gas division said earlier that South Africa’s offshore gas potential was "seriously interesting", as indicated by the exploration presence of several of the world’s biggest oil and gas companies. Offshore gas was also less complex than shale gas and the technology to exploit it was more advanced.

Mr Shoobridge said using more LNG in its energy mix would help South Africa to meet its carbon emission reduction commitments, and build the infrastructure needed for exploiting its own resources as well as growing market demand.

Shell is the world’s biggest LNG company, having boosted its position with the recent acquisition of Repsol’s LNG business outside North America for $4.1bn.

This added 7.2-million tonnes a year of directly managed LNG volumes, the energy and petrochemicals company said in January.

Mr Shoobridge said the costs of regasification terminals could range from $350m to $1bn, making it essential for the South African government to find a strong partner that was able to pull the necessary financing together.

Globally, demand for LNG was growing as several countries’ own natural gas resources were depleting, while supply was growing in other places where new technology was making it possible to access previously untapped gas deposits.

There were various technologies available for onshore and floating regasification LNG terminals, Mr Shoobridge said.

Floating terminals cost less, but also provided less growth flexibility than an onshore terminal.

Many countries around the world were using floating terminals and Shell was busy with about 13-14 projects internationally. That also meant there was strong competition to secure these units.

For an onshore terminal, South Africa could use various sites, including Saldanha, Coega or Richards Bay, all three of which could accommodate both the terminal and an associated combined cycle gas turbine independent power producer. Linking the terminal to a power station would be the first step. After that the terminal could supply other customers.

Mr Shoobridge said South Africa needed an integrated strategy to tackle its gas infrastructure and he welcomed news of the government’s coming gas master plan. However, he said that decision-making needed to be fast-tracked.

Other countries, such as Argentina, had identified the need to replace costly diesel in power generation and took quick decisions. Once the decision was made, it would take only three to four years to put an LNG terminal into operation.