LNG POWER PROGRAMME
Gas project may gain from dollar funding
Alexandra Cluver suggests a careful assessment of the advantages of greater competition and accessibility against the risks associated with a dollar-based tariff
The country’s much-anticipated liquefied natural gas (LNG) to power programme was formally announced in early October, intended not only to create a new significant power source for our energy mix but also to kick-start a domestic gas industry. The programme requires bidders to deliver an integrated solution, providing the full value chain from the procurement of gas to the provision of power to Eskom, for an aggregate of up to 3,000MW, between two ports. The cost of development is significant, requiring a capital outlay estimated to be between R35bn and R55bn. In addition, there are operating expenses including gas supply (which is likely to be between 75% and 85% of the overall operating costs). The backbone of the programme is a 20-year power purchase agreement with Eskom, supported, we assume, by a sovereign guarantee in the same way the renewable energy programme was. Based on current information, the tariff is to be bid in rand. A large portion of the costs associated with the...
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