Africa represents a large commercial opportunity for LNG, given the size of its population, rising living standards, energy demand outlook, and shift towards cleaner energy sources. It is common knowledge that sub-Saharan Africa suffers from power blackouts, and being a very large and diverse region made up of countries that have different natural resources, policies, and challenges, a ‘quick fix’ could be coined as fantasy, even though the drive and determination demonstrated by local businesses to solve Africa’s energy crisis is strong.
South Africa, with a population of approximately 57 million, is pushing to diversify its energy sources away from coal. Notable market trends in this country include urbanisation and sustainability. Populations are shifting from rural to urban areas, putting an extra strain on local governments and their obligation to maintain and upgrade key infrastructure, such as the electricity distribution system. Given the long and inconvenient history of power shortages, LNG has the ability to transform the South African economy, supporting industrialisation, reducing reliance on inefficient, ageing coal plants, and contributing to regional trade.
Leveraging on low LNG prices
In South Africa, energy supply is dominated by coal – accountable for approximately 77% of primary energy demand. While renewables are on the national agenda, natural gas is seen as key to satisfying energy demand and advancing the country’s transition to cleaner energy sources. However, the general consensus from the public is that priority should be given to affordable electricity supply, irrespective of source, albeit trending towards renewables.
Electricity generation is the largest key source of greenhouse gas (GHG) emissions in South Africa. State-owned vertically integrated utility Eskom produces more than 90% of the country’s electricity, generating 44 GW of power in 2019, of which 36.5GW came from coal. Natural gas has been identified as a key energy source for South Africa’s growth and this requires infrastructure to support the transportation of this alternative energy source. Stimulating a faster energy transition can be realised by tighter linkages between the state and private sector, whose key interests revolve around LNG import and further distribution of natural gas to customers in the industrial, power, and transport sectors.
There is little doubt that LNG can alleviate South Africa’s energy challenges in the short-term, but we are living in unprecedented times. The COVID-19 pandemic has led to demand destruction, record low pricing, and concerns over the viability of liquefaction projects. Global LNG trade is likely to register single digit or even negative growth in 2020, however this can lead to opportunistic buying and the emergence of new buyers. LNG is becoming cost-competitive with other fuels, and a drop in spot/term prices could significantly reduce the cost of electricity. Lower LNG prices could result in LNG becoming an increasingly viable feedstock across industries in South Africa.
The national oil company of South Africa, PetroSA, owns and operates the world’s first gas-to-liquids (GTL) refinery at Mossel Bay, South Africa, and remains the third largest GTL refinery among the five now in operation worldwide. Due to decreasing domestic gas production from the nearby offshore gas fields, which act as gas feedstock for the refinery, PetroSA investigated the possibility of importing LNG into Mossel Bay.
In 2014, however, the company decided not to establish the proposed floating import terminal in the Southern Cape region, as the location was deemed technically and commercially challenging. The study had found that meteorological and oceanographic conditions in Mossel Bay were severe and would increase the logistical and overall gas supply costs of the project. These elements alone are of fundamental importance when considering alternative import infrastructures as enablers for LNG import to South Africa, such as floating LNG loading and offloading technology.
A growing interest to invest in existing port infrastructures and power plants could be anticipated, thereby harvesting the short-term and long-term benefits of brownfield sites gaining a new lease on life, rather than building completely new facilities. Small scale LNG is a relatively small and recent addition to an already complex market, but it is growing and has proven itself scalable, profitable, and brimming with potential. However, from a port perspective, the diversity in size and type of LNG vessel causes challenges with infrastructure; building traditional fixed structures can be prohibitively expensive if it is to service too large a range of vessel sizes. Similarly, port geography and conditions can make traditional infrastructure uneconomical, impractical, or even impossible.
An initiative to improve infrastructure
A South African government initiative called ‘Operation Phakisa’ was initiated in 2014. This represented a fast-track approach to development of South Africa’s port infrastructure. The South African government’s starting point grew from the fact that South Africa is surrounded by a vast ocean and full advantage had not been taken of the immense potential of this untapped resource. At the time of this initiative, the government stated that the oceans had the potential to contribute up to R177 billion to the gross domestic product (GDP) and create just over one million jobs by 2033. LNG import via existing port infrastructures could therefore blossom into an attractive industry for the South African population.
Jettyless LNG transfer case study
When evaluating LNG import and the infrastructure needed to move the LNG onshore, an important consideration is the prevalent oceanic conditions. Several criteria for this case study were examined to consider whether a site was suitable for a jettyless solution, including weather conditions, bathymetry, and onshore facilities. Initial investigations started with reviewing nautical charts of the ocean space adjacent to the onshore facility in order to identify suitable locations to moor the LNG carrier. Local metocean characteristics were then reviewed to decide on the initial jettyless design and to determine a suitable orientation of the LNG carrier with respect to the local weather conditions. A relatively sheltered location is preferred to maximise uptime and lower design requirements, thereby leveraging on existing experience of LNG carrier mooring systems.
The location was then identified; layout and mooring studies were performed for the LNG carrier based on the site specific metocean characteristics. Once the field layout, metocean characteristics, and process requirements – defined by the onshore facility and LNG carrier – were set, an initial design for the jettyless system was outlined.
The floating jettyless transfer system from ECONNECT Energy for loading and offloading LNG, the IQuay, utilises industry standard technology in an innovative way. Every piece of equipment on the IQuay jettyless system is proven through several years of operation in the industry, whereby transfer of LNG with this system is similar in principle to ship-to-terminal technology. In this case, the semi-submersible platform acts as a floating extension to the LNG storage facility, whether it be onshore or floating itself. Firstly, the semi-submersible platform is positioned alongside the LNG carrier and hose saddles are lifted to the LNG carrier by the carrier’s ship crane. Secondly, LNG is transferred through aerial hoses connected to emergency release couplings (ERC) at the platform manifold, which is standard practice known from ship-to-ship operations. The LNG is then further transported through floating insulated cryogenic hoses to the LNG storage facility or terminal.
An essential, technical element to the IQuay jettyless transfer system is the floating hoses between the IQuay semi-submersible platform and, if considering an onshore terminal, the onshore manifold. Floating hoses have been used in oil transfer for decades and are now considered reliable, field proven technology. In recent years, Trelleborg has developed similar technology for LNG transfer that is now proven through successful installation and operation with ECONNECT’s IQuay, which was first put into operation in 2017 with project development partners and enablers Naturgy Energy Group and operational collaboration with Gasum, Air Liquide, and Anthony Veder. The hose technology is based on a combination of field proven technologies and is designed to deliver a high level of safety whilst preventing risk of incidents, thanks to the arrangement of a double containment structure and integrated monitoring leak system.
Saldanha Bay, South Africa
The South African coastline spans 2954 km with eight strategically positioned commercial seaports. South Africa does not currently have an LNG import terminal, but Richards Bay, along with Coega and Saldanha Bay, have been flagged as possible locations. Saldanha Bay is one of the largest and deepest natural harbours in southern Africa with dredged depths to 23 m below chart datum and an artificial breakwater to improve the conditions within the bay. Saldanha Bay is particularly suitable for a jettyless system to allow for import of LNG due to the favourable site conditions.
In general, there can be conflicting users of the marine shoreline. A jetty is sometimes seen by the public as not viable since this results in the exclusive use of the territory. Not only that, but jetty construction is becoming a challenge due to environmental restrictions: drilling and blasting are being prohibited in some areas, and in others it is necessary to remove the infrastructure after the operational life of the project is surpassed.
The key advantage when looking at evaluating potential LNG import terminals is the IQuay’s plug and play characteristics. Providing the existing onshore infrastructure can be modified or upgraded to transport and store the LNG fluid, no other major civil works need to be carried out due to the inherent flexibility for the floating unit to connect to any size of ship. Marine works would thus be very limited, hence the impact to the surrounding environment will be much reduced compared to a traditional jetty solution. When not in operation, the IQuay can be moored in idle mode until the LNG carrier is planned to transfer LNG from ship to shore, hence eliminating any risk for obstructing nearby marine traffic. Ultimately this means taking advantage of existing port infrastructure, thus fully supporting the goals of ‘Operation Phakisa.'
The standard IQuay can be deployed up to 800 m from shore. The chosen configuration at Saldanha Bay was with a shorter distance and the carrier was positioned head sea to the predominant sea states, hence minimising ship motions in waves. Because the IQuay system requires very little space compared to a traditional jetty, the nearby mussel farms would not be affected by a jettyless infrastructure, and for the proposed location, little to no dredging is required. In addition, very little disturbance will be inflicted on the local marine life since the construction at site is almost non-existent for this floating system. Interference with the sea bottom is limited to the mooring of the LNG carrier.
A floating jettyless LNG transfer system can enable LNG import at Saldanha Bay, with minimal environmental impact and significantly reduced costs. Similarly, such jettyless systems can resolve the LNG import challenge in South Africa by implementation and integration at other locations, such as Cape Town, Mossel Bay, Port Elizabeth, Ngqura, East London, Durban, and Richards Bay.
- South Africa’s energy needs cannot be satiated by renewables alone. LNG and natural gas should be seen as the most reliable and viable alternative.
- The current low LNG pricing could stimulate new entrants to the LNG import markets, thereby accelerating growth within regional gas ecosystems.
- Closer partnerships between buyers and suppliers of LNG are required to stimulate new LNG import projects.
- Floating jettyless transfer technology is a key enabler in the LNG value chain, offering a less complex, more competitive, safe, and faster route to boost LNG import along South Africa’s coastline.
- Department of Forestry, Fisheries and the Environment. 2019/20 - 2023/24Strategic Plan and 2020/21 Annual Performance.
- IEA, ‘Africa Energy Outlook 2019’.
- SLR Consulting South Africa (Pty) Ltd, ‘Strategic Environmental Assessment of the Port of Saldanha – 2017 Revision’, (March 2018).
- SAMSET Supporting Sub-Saharan African Municipalities with Sustainable Energy Transitions, ‘Energy and urbanisation in South Africa: Context report and literature review’, (December 2013).
- South African Oil and Gas Alliance (SAOGA), ‘South African Upstream Oil and Gas Port Handbook Third Edition’, (2015).