The agreement will enable state utility Eskom to import gas at the proposed Zululand LNG terminal in Richards Bay.
Exxon Mobil Corp struck a preliminary deal to bring liquefied natural gas to South Africa, which will use the fuel to bolster its coal-reliant power grid, according to people familiar with the matter.
The agreement will enable state utility Eskom to import gas at the proposed Zululand LNG terminal in Richards Bay, an industrial city on the country’s east coast, said the people, who asked not to be identified because the accord hasn’t been officially announced.
The fuel will be used at a 3 000-megawatt power plant nearby that has yet to be constructed, the people said. Exxon and Eskom declined to comment.
Plagued by years of blackouts, South Africa is attempting to improve the reliability of its electricity supply. It’s also trying to reduce emissions by transitioning away from burning coal, which is used in about 80% of the country’s power generation. Importing LNG is an opportunity to solve both those problems, but typically comes at a higher price.
The deal helps Exxon toward its strategic goal of doubling LNG supplies to more than 40 million tons a year in the decade through 2030. The company recently started up its Golden Pass export terminal on the US Gulf Coast and plans to make final decisions later this year on whether to proceed with the construction of similar facilities in Mozambique and Papua New Guinea.
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Eskom has called gas a “bridge fuel” that will help incorporate renewables into the grid by providing baseload power when the wind doesn’t blow and the sun doesn’t shine.
But South Africa produces little natural gas domestically and faces a long wait for gas turbines from suppliers such as Siemens AG and General Electric Co, meaning it’s poised to delay existing plans to shut about 20% of its coal-fired electricity generation capacity by 2030.
Source: Bloomberg