Huge lifeline could pull South Africa from the edge of disaster

A new interim gas strategy from petrochemical group Sasol could pull South Africa back from the “gas cliff” threatening businesses and thousands of jobs in the country. But it won’t come cheap, warns energy expert, Chris Yelland.

South Africa is marching towards a gas crisis, with the supply of Sasol’s natural gas (LNG) from its Mozambican fields projected to run dry by July 2028.

Currently, the gas fields in Mozambique supply natural gas to South African industries via pipeline.

Once these supplies run out, there will be a critical gap in the nation’s energy supply chain, leaving entire industries stranded.

This is particularly alarming for South Africa’s industrial sector, where natural gas is essential for operations that contribute substantially to economic output and employment.

The Department of Electricity and Energy previously noted that this “gas cliff” threatens to undermine up to 5% of the nation’s GDP, putting hundreds of thousands of jobs at risk.

The government has been working with Sasol on a way forward, with import from Qatar seen as on of the more promising solutions to get liquefied natural gas to the country.

However, getting the infrastructure in place to import the resource will take time, with serious doubts that it could be achieved by the time South Africa hits the cliff’s edge and goes over.

According to Yelland, Sasol has now put forward a new strategy which could pull South Africa back from the crisis—albeit temporarily.

The group has proposed a plan that would see it redirect Methane Rich Gas (MRG)—a synthetic gas produced at its Secunda operations—as a stopgap measure to maintain gas supplies from mid-2028 through to mid-2030.

This will buy South Africa two more years of gas supply while it sorts out a more long-term solution.

“This synthetic alternative would fully replace natural gas volumes for contracted external customers over the two-year bridging period, offering South Africa much-needed breathing space to finalise and commission LNG import infrastructure,” Yelland said.

But going this route would come with some costly trade-offs, he warned.

Costs and regulatory hurdles

The first big impediment to the project is that it hinges on regulatory approval and technical feasibility, Yelland said. The second big issue is price.

Yelland said that Sasol has begun formal engagements with the energy regulator Nersa to obtain approval for a new maximum gas price that would reflect the true cost of producing MRG.

These costs of higher than the current natural gas prices regulated by Nersa.

“Internally, Sasol’s own pricing models show that the synthetic gas has historically been undervalued, with Sasol Gas purchasing it below cost—a situation the company says must change to ensure the bridging plan is economically sustainable,” the energy expert said.

Sources at Sasol told Yelland that the pricing approval is fundamental to the project, otherwise the plan cannot be implemented.

If it moves ahead, Sasol with then engage with customers to get volume commitments and contract for the 2028 to 2030 window.

On the technical side, Sasol warned that a shift from natural to synthetic gas would require detailed assessments and potential upgrades to customer infrastructure to ensure compatibility. Again, this carries costs.

However, with the clock counting down on the natural gas supply, entire industries are at risk of being left stranded, making the contingency a critical necessity.

“Companies in sectors such as steel, glass, chemicals and food processing are heavily reliant on natural gas as a feedstock or energy source,” Yelland said.

“Many have been scrambling for alternative fuels, contemplating relocations, or scaling down operations due to the uncertainty around post- 2028 gas availability.”

The assurance of a 24-month MRG bridge provides critical clarity and will allow industries to adjust and align their strategies with the evolving LNG rollout—but ths relief will come at a premium, he said.