"What we are trying to do with the [pricing] methodology is give a signal to new entrants that South Africa is in fact a good place to bring additional gas, make a reasonable return, and be able to expand your business as you see fit," National Energy Regulator of South Africa (Nersa) member Ethel Teljeur told reporters on Wednesday.
Nersa had to balance attracting new investment and calls from existing customers for the price of piped gas to remain low. For new entrants to enter the piped gas market, they needed to get good credit worthy customers, she said.
The customer should then need large volumes of gas, which would enable the required facilities to be built.
Teljeur said determinations the minister of energy had made in terms of the integrated resource plan for electricity, which put gas as one of the resources for electricity generation, was an added impetus.
"Also, there is a lot of gas being discovered on the east coast of Africa. Of course there is a shale gas potential, but we don't know at this stage. All of those, as well as increases in electricity prices, make the case that increasing the use of gas is a good decision.
"We hope that that will stimulate new entry and customers will see gas as a viable alternative," she said.
Increased demand for gas
Teljeur addressed how in the past, people found gas expensive because electricity was very cheap. Now that electricity prices were on the rise, the demand for gas would increase and more people would consider gas as an affordable alternative.
In 2011, Nersa had held a series of dialogues on increasing investment in the gas market in South Africa.
"One of the key findings was that no one could enter the gas market at this stage unless they have a large customer. That customer must be credit worthy and be a large anchor customer," Teljeur said.
The likely candidate for that kind of a customer would be either a petrochemical company or a company involved in electricity generation. Teljeur was addressing reporters at a briefing held in Rosebank on Wednesday.
The briefing was aimed at giving further details to Nersa's approval of piped-gas transmission tariffs for Sasol Gas, which will take effect on March 26 2014. – Sapa