Eskom and Zululand Energy Terminal Move Forward on LNG Import Plans for Richards Bay
On Friday, Eskom signed a Head of Agreement with Zululand Energy Terminal (ZET) that outlines the framework for a liquefied natural gas (LNG) import facility at the Port of Richards Bay. While the document is not a final contract, it sets the stage for detailed negotiations on pricing, volumes, financing and implementation schedules.
The proposed facility would receive LNG by ship, store it onshore, and regasify it for use in power generation and industrial processes. Eskom intends to become a long‑term off‑taker, providing the anchor demand that makes the project financially viable for investors.
Why LNG Matters for South Africa’s Power Mix
South Africa’s Integrated Resource Plan (IRP) 2025 calls for 6,000 MW of gas‑to‑electricity capacity by 2030, split between Eskom and independent power producers. Eskom’s share is earmarked at 3,000 MW, and the Richards Bay gas‑fired plant is positioned to contribute a significant portion of that target.
Natural gas is widely regarded as a transition fuel because its combustion emits roughly 50 % less carbon dioxide than coal when producing the same amount of electricity【1】. Gas‑fired plants also offer operational flexibility, able to ramp up quickly during peak demand or when renewable output dips, thereby enhancing grid reliability.
Project Scope and Operational Model
The Richards Bay power station is planned as a mid‑range facility, meaning it will operate intermittently rather than as a baseload plant. It will be dispatched primarily during periods of high electricity demand or low wind/solar generation, supporting overall system stability.
Eskom intends to develop the project through a private‑sector participation model that includes:
- External equity investors
- Project‑finance debt structures
- Long‑term power purchase agreements (PPAs) for electricity sales
- Long‑term LNG supply contracts
Zululand Energy Terminal, a joint venture between Vopak Terminal Durban, Reatile Group and Transnet Pipelines, has already secured a concession from the Transnet National Ports Authority to develop and operate the LNG import facility on an open‑access basis. Open access allows multiple users to utilize the terminal under agreed commercial terms, subject to available capacity.
Context: South Africa’s Domestic Gas Outlook
Domestic gas production has been declining, and regional projects such as the Mozambique‑South Africa pipeline have faced delays. This situation has fueled concerns about an impending “gas cliff,” where existing supplies could fall short before new sources are reliably available【2】. Imported LNG, while typically more expensive than locally produced gas due to liquefaction, shipping, storage and regasification costs, offers a way to bridge the gap and diversify the country’s energy sources.
The IRP 2025 acknowledges this reality by allocating a substantial share of future capacity to gas‑to‑power, recognizing that gas can provide the firm, dispatchable power needed to complement variable renewable generation.
Next Steps and What to Watch
With the Head of Agreement in place, the parties will now move into detailed negotiations covering:
- LNG pricing mechanisms and volume commitments
- Financing structures, including potential involvement of development finance institutions
- Construction timelines for both the import terminal and the power plant
- Regulatory approvals and environmental impact assessments
Stakeholders, including industry analysts and civil society groups, will be monitoring how the project balances cost considerations with South Africa’s climate commitments and energy security objectives.
References
- International Energy Agency (IEA). “Natural Gas – Fuel Overview.” 2023. https://www.iea.org/reports/natural-gas-fuel-overview
- Department of Mineral Resources and Energy (DMRE). “Integrated Resource Plan 2025.” 2023. https://www.energy.gov.za/files/Irp2025.pdf
