South Africa’s looming gas supply crisis: Dr Davies Tsikayi speaks to SAFM

This transcript has been edited for clarity. Repeated words and obvious transcription errors have been removed without changing the meaning of the interview.

John: South Africa is approaching a major energy challenge. Sasol is expected to reduce gas supplies to customers from 2028.

There are a whole lot of issues around that. Dr Davies Tsikayi is an Energy Specialist from Africa International Advisors and has issued a number of warnings about this.

Doctor, thank you very much for joining us. You say this is going to have a major effect on our GDP and jobs.

Dr Davies Tsikayi: Thank you, John, and good morning to the listeners.

It is going to affect the country’s GDP because the economic activity supported by the gas supply we receive from Mozambique’s Pande–Temane fields accounts for about 5% of GDP.

It also has a direct effect on jobs. Around 100,000 direct jobs are at risk, while approximately 500,000 direct and indirect jobs are linked to gas-dependent industries.

John: This is not something that should be swept under the carpet. This will be a crisis if the supply is reduced.

Dr Davies Tsikayi: It is a major crisis because many companies rely on gas.

If they no longer have access to this gas, the alternatives will come at a higher cost. That could have serious implications for how these industries and commercial operations continue doing business.

John: Why would Sasol want to cut its gas supplies?

Dr Davies Tsikayi: Sasol has announced to the market that it will reduce supply.

This is mainly because the gas volumes it receives from the Pande–Temane fields through the ROMPCO pipeline are declining.

Sasol has announced that it will cut supply to the external market so that whatever gas remains can be used for its own operations.

Sasol has also announced that it could potentially supply methane-rich gas as a bridging fuel.

It recently submitted an application to NERSA. From what we can see in that application, the new methane-rich gas will come at a higher cost than the gas currently being supplied.

There is therefore a domino effect from the existing gas supply coming to an end.

First, there will be a bridging supply that comes at a higher cost. After that, South Africa will probably need LNG imports, which will also come at a higher cost and will be closely linked to prices in international markets.

All of this creates an exposure that industrial and commercial users did not face before.

John: What does this mean? Is this going to increase the cost of everything?

Dr Davies Tsikayi: It is going to increase the cost of many things.

Think about products such as lubricants, which are processed using gas. There are also many gas burners used by industries in Gauteng and Mpumalanga.

All of this will create a ripple effect and raise the cost of living.

John: Unfortunately, we have to leave it there. Dr Davies Tsikayi is an Energy Specialist from Africa International Advisors.