Closely linked to the question of ‘who’ will undertake the development of the LNG import infrastructure and import the LNG, is the issue of ‘where’ will this be undertaken? The position of the land on which the receiving terminal will be sited is critical as the terminal will ideally need to be built as closely as possible to the regasification facility. There are a number of South African ports where such infrastructure can be developed, however each has its own particular challenges.
For instance, Saldanha Bay is presently undergoing a feasibility study by PetroSA (the South African national oil company) for import of LNG to support its gas-to-liquids facility at Mossel Bay. However, there are some distinct environmental hurdles to be overcome, given the proximity of the port to the West Coast National Park with its pristine Langebaan Lagoon (a Marine Protected Area).
Another concern is space for facilities, both from the marine side (including an FSRU and, if this option is adopted, a jetty, breakwater and pipeline to shore) and the power generating side. Given present port configuration and development, should development be sought at Saldanha Bay, it is likely this would be an offshore FSRU, with the power plant located outside of the port precinct. However, land in and around Saldanha Bay is at a premium and is not readily available. Consequently, state intervention may be required to enable developers to secure appropriate space to develop their power plant and associated infrastructure. Easements or other similar rights of way will also be required in order to run the necessary gas pipelines from the regasification facility to the receiving terminal and then to the power plant itself.
Exacerbating this contest for space is the current development of LPG import infrastructure at Saldanha Bay. The possible dramatic curtailment of petroleum refining capacity in South Africa over the next 2 to 5 years could mean up to a 70 per cent reduction in LPG production and availability. LPG is Transnet’s current gas focus at Saldanha Bay, not LNG, and in the event of the need to import LPG, competition for space and resources at South African ports might favour LPG.
Richards Bay is an ideal location for new gas power plants. Richards Bay is ‘energy-hungry’ due to the nature of the heavy industries in the vicinity. However, Richards Bay is also waterstarved, and the significant cooling water requirements required for power generation will most likely have to be supplied by a desalination plant. Richards Bay is an excellent deepwater port that can easily accommodate large bulk carriers, although it will be necessary to identify areas within Richards Bay which are suitable for LNG terminal development. Unlike at Saldanha Bay, it may be possible to construct an onshore LNG regasification terminal at Richards Bay.
Mossel Bay was considered originally for development of LNG import infrastructure, given the direct access to the PetroSA GTL plant. However, this has been shelved during feasibility studies owing to environmental concerns and the hazardous marine environment in which the offshore LNG FSRU would have to be developed and operated.
If an offshore regasification solution is adopted, it will be necessary to consider issues arising from the use of an FSRU. In particular, developers will need to decide whether the FSRU will be chartered under a bare boat charter, a time charter party, or owned and operated outright. If the FSRU will be time chartered, then the developer’s obligations will largely relate to paying hire and issuing directions to the FSRU owner/operator. Chartering will insulate the developer from certain legal risks associated with ownership. However, it will create additional interface risks with the FSRU owner and possibly its lenders. Regardless of whether an offshore FSRU or onshore regasification terminal solution is adopted, if Transnet or another third party were to own and operate the regasification facility, the gas project company would require a tolling agreement with the owner/operator of the regasification facility in order to ensure that a committed supply of regasified LNG is available as and when required as feedstock for the power plant.