South Africa’s state-run logistics company Transnet has entered into a cost-sharing agreement with IFC, a member of the World Bank Group, for a Port of Richards Bay LNG import terminal feasibility study.
The study will look into the development of a liquefied natural gas (LNG) storage and regasification terminal at the Port of Richards Bay and the re-purposing of Transnet pipelines for natural gas transmission to inland markets.
Transnet said in its statement has identified significant industrial demand for natural gas and opportunities to leverage its ports, pipelines and rail assets to facilitate private investment in gas infrastructure for South Africa.
This initiative is intended to unlock the country’s natural gas network infrastructure to serve existing and growing gas markets, consisting largely of industrial and commercial off-takers located in KwaZulu-Natal, Mpumalanga, Free State and Gauteng provinces.
The aim is to facilitate private sector investment and partnerships with other state-owned companies (SOCs) for the development of South Africa’s natural gas infrastructure.
The Richards Bay Natural Gas Network (NGN) project will complement the delivery of LNG to new markets in the Eastern Cape and Western Cape provinces through the ports of Ngqura and Saldanha Bay respectively and will support government’s future gas-to-power projects, Transnet said.
The LNG terminal will be developed by private investors that will be selected through a competitive process to own a majority stake in a planned special purpose vehicle (SPV). Transnet and other SOCs will also participate in the SPV.
The facilities are expected to be operational by 2024, with the target timeline is dependent on Transnet being able to secure the necessary regulatory approvals.
The NGN project incorporates the LNG storage and regasification terminal in the Port of Richards Bay, plans for the re-purposing of Transnet’s Lily pipeline and Durban-Johannesburg pipeline for the transmission of natural gas, and the establishment of virtual pipelines for LNG to be transported to various markets by rail and road by 2024.
IFC has committed $2 million as part of the cost-sharing agreement. This will help Transnet conclude the feasibility study, establish the SPV, and inform the market of the transparent and public process to select the private investor.
The competitive process for partner selection will commence after Transnet has approved the NGN investment case and received the required regulatory approvals from the government.
The cost-sharing agreement allows the parties to leverage on Transnet’s existing infrastructure and IFC’s track record of providing innovative advisory for infrastructure projects that improve access to energy. IFC has financed eight LNG terminals globally and brings unmatched expertise in this sector.