Besides shale gas
Gas could be a game-changing source of energy for South Africa that could both compete with and complement the growth of renewable energy, depending on how the sector is developed.
This is according to research by Dave Collins and Tjaart Coetzee of MAC Consulting that was recently presented at a panel discussion that examined the impact of gas on South Africa's transition to a low-carbon economy.
The potential for gas as both a means to provide liquid fuel and generate electricity has garnered growing interest in the light of shale-gas exploration in the Karoo and significant offshore gas discoveries by a number of neighbouring countries.
Globally, the exploitation of "tight" oil and gas resources, particularly from shale rock formations, has revolutionised the energy landscape.
According to a report by the United States Energy Information Administration (EIA) released this week, new global shale gas resource estimates are 10% higher than those released in 2011, amounting to 7 299-trillion cubic feet of technically recoverable resources.
Large volumes produced at relatively low cost have "revolutionised" oil and gas production in the US, providing 29% of the country's crude oil and 40% of its gas output in 2012, the report said.
South Africa remains on top
In its assessment of 41 other countries, the EIA revised South Africa's shale-gas estimates down from 485-trillion cubic feet in 2011 to 390-trillion cubic feet, due to a reduction in the prospective area for the three shale formations in the Karoo Basin as well as the geological complexity caused by igneous intrusions into the shale formation, the report said. South Africa nevertheless remains in the top 10 countries with technically recoverable shale gas resources, above Russia and Brazil.
Despite the potential for shale gas in South Africa, there is much work to do to confirm the extent of the resources and to determine whether they are economically recoverable.
Besides the Karoo shale, however, there are a number of other sources of gas available to South Africa, including potential offshore gas, liquefied natural gas from neighbouring countries such as Tanzania and Angola, piped or shipped gas from Mozambique, and globally traded liquefied natural gas, which, thanks to American developments, has grown in abundance, according to Coetzee.
The advent of gas is positive for South Africa, particularly in terms of electricity supply, where the country is trying to shift away from carbon-intensive coal-fired power. Eskom accounts for an estimated 45% of South Africa's greenhouse gas emissions.
Gas has many advantages given its ability to meet baseload, mid-merit and peaking-power requirements, Collins told the Mail & Guardian, and it also produces far less greenhouse gas emissions than coal.
Coal-fired power releases roughly one tonne of carbon per megawatt hour (MWh) of electricity produced, whereas gas releases 0.4 tonnes.
Competitive cost
The cost of gas-fired electricity also appears to be very competitive when matched against the grid prices for other technologies, including renewables, Collins said.
Globally, gas prices vary from $4 per million British thermal units (mbtu) – the measure for internationally traded gas – to $17/mbtu, although the widely held view is that prices are likely to converge as more unconventional sources come on line.
According to Collins's analysis, a medium-priced scenario that puts gas at $10/mbtu could see a levelised cost of electricity from gas to be about R800/MWh, cheaper than renewable technologies such as wind and solar.
It is also cheaper than the estimated average levelised cost of electricity across the grid, amounting to approximately R820/MWh.
These estimates, measured in today's money, were given for the year 2018, based on current electricity prices, and escalated by the percentage increases of the tariff granted by the national energy regulator.
Unlike renewables, gas does not have the problems associated with power storage or the variability of supply to the grid, he said.
Gas to replace coal
Given these considerations, Collins expects gas to take investment away from coal and, although the timeline for the implementation of renewables will not be disrupted, gas could replace a significant portion of them.
But, regardless of the prospects of shale or offshore gas in South Africa, there is enough internationally traded gas to satisfy South Africa's needs, Collins said.
A number of factors could constrain gas development. Infrastructure in particular is a major bottleneck, with significant investment needed in areas such as import and regasification terminals, pipelines and the electricity grid, Collins said. There are also questions about who should make this investment.
"If gas is to happen, who then needs to make the decision to put in that infrastructure? Is it going to be Transnet, is it going to be PetroSA? Who is going to own and operate these facilities?" he asked.
Government intentions for gas development are another factor. There is limited space for gas in the department of energy's 20-year electricity road map, the integrated resource plan (IRP).
The state's overarching integrated energy plan, of which the IRP is only one leg, must be completed before the IRP can be reviewed to take into account the possibilities of gas.
Caution
But environmentalists have cautioned against the rush towards gas if it deters investment in renewable energy.
Richard Worthington, the local climate change programme manager of the World Wide Fund for Nature, in a presentation given in his personal capacity, said there is space for gas in the move towards a low-carbon economy as long as it does not inhibit renewable energy growth and it takes investment from coal.
But fugitive methane, or the leakage of gas from the supply chain, is a major concern.
According to the best available estimates, a global average of a 2.8% methane leakage rate will cancel out the climate benefits of moving from coal to gas, but it is already estimated to be about 3.2%, he said. Questions also remain about the infrastructure needed and the supply.
Nevertheless, about 58% of South Africa's energy demand is to generate heat so there could be a wide range of industrial processes that could be switched from coal to gas.
"There is a whole area of gas applications outside of electricity supply that have potential," he said.