South Africa’s Gas‑to‑Power Procurement: A Turning Point for LNG Imports
South Africa’s effort to build a liquefied natural gas (LNG) import market reached a critical juncture in mid‑2024 when the government moved closer to selecting preferred bidders for its Gas Independent Power Producer Procurement Program (GIPPPP). The outcome of this tender will shape whether the country can transition from dwindling pipeline gas supplies to a commercially viable LNG‑fuelled power sector.
Why LNG matters now
For decades, South Africa’s natural gas needs have been met largely by the Pande and Temane fields in Mozambique, delivered via the Rompco pipeline. Production from these fields is forecast to be exhausted by the early 2030s, and Sasol has announced it will cease third‑party gas sales by June 2030 [1]. At the same time, the Integrated Resource Plan (IRP) 2023 calls for new gas‑fired capacity to replace ageing coal plants and to provide firm backup for the growing share of wind and solar on the grid [2].
LNG imports are seen as the bridge that can supply the required gas while the country develops domestic exploration prospects, such as the Orange Basin offshore blocks.
The Gas Independent Power Producer Procurement Program (GIPPPP)
Launched in December 2023, the GIPPPP is the government’s first competitive tender for 2,000 MW of new gas‑fired generation from independent power producers (IPPs). After several rounds of clarification requests from potential bidders, the submission deadline was extended to 29 May 2026.
By the close of the bidding window, the program had received four proposals representing roughly 2,800 MW of planned capacity—exceeding the government’s target by 40 % [3]. This oversubscription signals strong private‑sector interest and indicates that financing is already being lined up by South African banks.
Expert perspective: Paul Eardley‑Taylor, Standard Bank
Paul Eardley‑Taylor, Head of Gas at Standard Bank, described the imminent selection of preferred bidders as a “watershed moment” for the country’s gas sector [4]. He noted that the June 2024 agreement between Zululand Energy Terminal (ZET), Eskom and ExxonMobil—covering the development of an LNG import facility at Richards Bay—marks an essential commercial milestone toward binding terminal use agreements.
According to Eardley‑Taylor, the appointment of preferred bidders will unlock the next phase of the project lifecycle:
- Financing for LNG terminals, associated pipelines and related infrastructure could commence in 2027.
- The first wave of gas‑to‑power projects, LNG import terminals and supporting works may require around US $7.5 billion in investment.
- Eskom’s planned gas‑fired plant at Richards Bay could add further capacity and drive additional downstream demand.
He emphasized that the gas‑to‑power tender will provide the “anchor demand” necessary to make LNG import infrastructure commercially viable, as power generation creates the scale needed to justify terminal construction.
Challenges on the road to implementation
While financial and commercial interest is growing, execution remains the biggest hurdle. Eardley‑Taylor observed that South Africa’s track record with novel, large‑scale infrastructure projects lags behind jurisdictions that have accelerated LNG development through special legislation and streamlined permitting—citing Germany’s rapid rollout of import terminals as a benchmark [5].
Additional considerations include:
- Ensuring long‑term, price‑stable LNG supply contracts rather than relying on volatile spot‑market purchases.
- Aligning imported LNG costs with alternative fuels such as diesel and heavy oil, rather than benchmarking against historically cheap pipeline gas from Mozambique.
- Advancing domestic gas exploration in the Orange Basin and other offshore/onshore blocks to reduce import dependence over the longer term.
Looking ahead
If the GIPPPP selects preferred bidders as anticipated, South Africa could see its first LNG‑fuelled power plants operational by the early 2030s, supporting grid stability while the country expands renewable capacity. The success of this initiative will depend not only on securing financing and regulatory approvals but also on building the institutional capacity to manage complex, cross‑border energy projects efficiently.
As Eardley‑Taylor succinctly put it, “South Africa is just catching up with the rest of the world.” The coming months will reveal whether the nation can translate this ambition into tangible, low‑carbon‑compatible energy infrastructure.
