Shell SA backs Karpowership, criticises slow pace of procurement

Shell SA has thrown its weight behind powerships and expressed its frustration with the slow pace of the government’s emergency power procurement programme.

The global oil and gas giant has partnered with Karpowership SA to exclusively supply its three SA gas-to-power projects with liquefied natural gas (LNG), though it hasn’t  disclosed the volumes, value or duration of the deal.

The projects, and Shell’s supply of gas to them, “will meet the country’s immediate electricity needs while progressing it towards net zero carbon emissions”, Hloniphizwe J Mtolo, Shell SA chair said in a statement. ­­­­

Karpowership, majority-owned by Turkey’s Karadeniz Energy Group, was in April announced as a winning bidder of the government’s Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP), an emergency power procurement initiative. The programme was established to swiftly procure 2000MW of emergency power — which is expected to be available by August 2022 — in a bid to alleviate SA’s crippling electricity shortage.

Karpowership’s bids, totalling 1220MW, would see floating LNG-fired power plants, moored at the ports of Ngqura, Richards Bay and Saldanha Bay for 20 years.

Last month the project encountered a major stumbling block when the department of Forestry and Fisheries declined to grant Karpowership the environmental approvals it requires to operate at all three sites. The department said  the applications fell short on public participation and additional studies, especially relating to the impact of the underwater noise on marine life.  

Karpowership will appeal the decision but time is fast running out as the immovable deadline to obtain all approvals and reach financial closure is July 31.

The programme is also the subject of a legal challenge by DNG Energy, a losing bidder, which alleges it was unfairly excluded from the programme after refusing to pay a bribe.

Even before the winning bids were announced, the design of the programme came under criticism for seemingly favouring costly gas-to-power over cheaper solutions that could deliver comparable power to the grid.

Mtolo said Shell is “extremely concerned” that material delays in the RMIPPPP will have “a significant negative consequence on local electricity security and the progression to renewable energy expansion and economic recovery”.

Mtolo said gas has a critical role in SA’s Just Energy Transition away from coal as it pairs well with renewables, and provides a reliable energy source when conditions are not ideal for wind- and solar-power generation.

Shell viewed the Karpowership SA bid as an opportunity to bring additional gas into the market for industrial and commercial applications, assisting to decarbonise operations, he said.

Shell said it was committed to the transformation of the country’s energy mix.

steynl@businesslive.co.za