Natural gas use in South Africa
23 May 2013
FFF council meeting.
Johannesburg
Sibbele Hietkamp
South Africa National Energy Development Institute
SANEDI
Contents
Natural gas general
International developments
Current and future availability of natural gas in
South Africa
Infrastructure requirements
Carbon dioxide emissions using coal or gas as
primary energy source
Compatibility of natural gas with renewable
energy in electricity production
Research gaps and conclusions
Natural Gas general (NG)
NG is composed of mainly methane and may contain other gaseous
hydrocarbons, non gas liquids, carbon dioxide, helium, nitrogen, water
vapour and hydrogen sulphide.
Conventional NG reserves are present at pressure in rocks with a large
permeability and porosity and are capped with impermeable rock layers.
Typically conventional NG will rise under its own pressure through a
borehole and can be used after separation of the other components.
Non conventional NG is extracted by fracturing less porous rock formations
e.g. shale gas and has become commercially attractive particularly in the
USA.
Coal Bed Methane (CBM) can be extracted from coal seams and is already
exploited in e.g. Australia.
Methane clathrate, a solid composed of water and methane, can form under
conditions of low temperature and high pressure in the oceans. Large
quantities of methane clathrate have been found in deep and cold water, but
currently commercial exploitation of these resources is not viable.
Natural Gas general (NG)
Transport of NG is mainly by pipeline, e.g. pipelines are now transporting
natural gas from Western Siberia to Western Europe. Significant quantities
of NG are also transported by ship in a liquefied form(LNG Liquid Natural
gas) at -160 C. Particularly Japan is importing a large amount of LNG.
Uses of natural gas are for heating purposes, industrial processes e.g. the
manufacture of ammonia, for power generation and also for transport
vehicles. For the latter use, natural gas is pressurised (CNG Compressed
Natural Gas) in excess of 20MPa and is mainly used in buses.
The Greenhouse Warming Potential(GWP) of NG is 21 times that of carbon
dioxide (100 year time frame) and about 70 over a 10 year time frame. It is
therefore important to avoid leakage during extraction, transport, storage
and use of NG.
World wide natural gas production/consumption
1970- 2011
BP statistical review of world energy demand 2012
3500.0
3000.0
2500.0
2000.0
Billion cubic
metres
1500.0
1000.0
500.0
0.0
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
NG proven reserves
BP statistical review of world energy demand 2012
50.0
45.0
40.0
35.0
Trillion m3
30.0
25.0
20.0
15.0
10.0
5.0
0.0
International developments
Strongly increasing demand in e.g. China, India.
Also more demand in OECD countries mainly due to fuel switching from
coal to gas.
Potential increase in NG demand for transport if the crude oil price
increases substantially.
Non conventional gas may change overall availability and demand
Russian NG export by pipeline, 207 billion m3 to mainly Western
Europe. Other large pipeline exporters are Canada (88 billion m3),
Norway (92 billion m3), and Netherlands (52 billion m3) to neighbouring
countries.
The largest LNG exporters are Qatar (102 billion m3), Malaysia (33
billion m3), Nigeria (26 billion m3) and Trinidad and Tobago (19 billion
m3) and the largest importers are Japan (107 billion m3), Western
Europe (91 billion m3) and South Korea (49 billion m3)
Natural gas prices
BP statistical review of world energy demand 2012
16.00
14.00
12.00
$US/million B tu
10.00
8.00
LNGJapan
UK
6.00
USA
4.00
2.00
0.00
1985
-2.00
1990
1995
2000
2005
2010
2015
International price developments
A large quantity of shale gas is currently entering the market, causing
considerable pressure on NG prices, particularly in the USA.
It is likely that more LNG facilities will be constructed in countries
with large reserves of NG and that are not connected by pipeline to
major markets.
It is likely that the price gap between pipeline gas and LNG will be
narrowing due to the building of more LNG infrastructure.
Overall it is expected that the demand for NG worldwide will increase
faster than the demand for oil and coal. (IEA WEO 2010)
There are two opposite views on the future price of LNG (1)
Source: Mac consulting
Oil majors - the price:
• Will continue to be disaggregated;
• Will continue in the East to be tied to the oil
price;
• Will rise above $4 in the US.
Disaggregation and
high average prices
There are two opposite views on the future price of LNG (2)
Source Mac consulting
More prevalent view:
• Market pressures lead to a decoupling of
the gas price from the oil price within the
next 5 years, as supply, particularly from
unconventional shale sources, continues to
rise faster than demand.
Convergence and
lower average prices
South Africa reserves and resources
According to EIA:
“In 2009, South Africa produced 67 Bcf,(1.9 billion m3 ) of natural gas
and consumed 191 Bcf (5.4 Bcm) the remaining 124 Bcf (3.5 Bm3
)was imported from neighbouring Mozambique. South Africa has
very limited and declining conventional natural gas reserves but
potentially large shale gas resources” (Energy Information Agency,
South Africa Oct. 5, 2011)
From the above quote it is clear that South African reserves are
small, but there may be large resources in the form of
unconventional gas. The largest of these potential resources are
“485 Tcf (13.7 trillion m3 )of technically recoverable shale gas” (EIA
and Advanced Resources International). In addition there is CBM
(Coal Bed Methane) currently estimated at 10 Tcf. (0.28 trillion m3)
“Our initial studies indicate a conservative estimate of around 10 Tcf
(0.28 trillion m3 )total gas in place for all coal-bed methane basins,”
according to Mthozami Xiphu, chief executive officer at Petroleum
Agency South Africa March 6 2012 IOL.
South Africa reserves and resources
The NG resources of about 500 tcf (14 trillion m3) in South Africa are very large
compared with NG reserves in other countries e.g. the US and Saudi Arabia
reserves are about 8 trillion m3. Assuming that “only” 10% of the resources will
become reserves, then he South African reserves would be comparable to the
reserves of Venezuela and Nigeria.
Such large reserves can change the energy future of South Africa and with it
increase economic growth of the country in a significant way. (Econometrix
report)
In Mozambique, recently large new reserves of natural gas have been
discovered off shore, which may over time lead to an expansion of gas exports
to South Africa.
LNG imports may become attractive for South Africa.
NG has been discovered along the South West coast of South Africa as well as
along the coast of Namibia. Currently it is not certain if economic exploitation is
viable.
South Africa demand
Gas has been used in South African cities for more than hundred years e.g.
the supply of gas in Johannesburg started in 1892 and was generated by
coal gasification (town gas).
Gas is supplied by pipeline from Sasol and is composed mainly of methane
(NG) and hydrogen.
Egoli gas, the gas supplier in Johannesburg, has a 1200 km gas network in
the greater Johannesburg metropolitan area and is distributing the gas
mainly to industry but also to households.
ROMPCO (Republic of Mozambique Pipeline Investment Company) from the
Pande and Temane gas fields to Secunda. ROMPCO is owned by Sasol
(50%), Mozambique government (25%) and South African Government
through CEF iGas (25%) and has a capacity of 180 million gigajoules
annually (4.7 billion m3/y) and is 865 km long.
PetroSA is exploiting gas from off shore fields and is converting it into liquid
fuels.
LPG demand and supply is about 600 000 tonnes and is a liquid under a
moderate pressure
Exploration
A number of companies (Shell, Sasol, Anglo American, Falcon Oil and Gas)
have requested permits for the exploration of shale gas, but due to
environmental concerns regarding hydraulic fracturing, the government has
invoked a moratorium on these requests starting April 21 2011.
A study was done by DMR and PASA on the merits of exploiting shale gas in
South Africa
The recommendation of the study was that “Approve hydraulic fracturing
under augmented regulation and close control”.
An Econometrix study commissioned by Shell showed that if 10% (50
tcf,1.41 trillion cubic meter) of the potential resources (485tcf) can be
extracted economically then 700,000 jobs will be created and 200 billion
value will be added annually for 25 years.
The moratorium was lifted on 7 September 2012 but is still in place
regarding hydraulic fracturing.
NG demand by country 2011
BP statistical review of world energy demand 2012
800.0
700.0
600.0
Billion m3
500.0
400.0
300.0
200.0
100.0
0.0
Future demand
Power generation
Eskom has four OCGT (Open Cycle Gas Turbine) power stations, Acacia (Cape
Town), Fort Rex (East London), Ankerlig (Atlantis) and Gourikwa (Mosselbay), running
on diesel and fuel oil and are used for back- up power, peak shaving and voltage
stabilisation.
Eskom and IPP (Independent Power Producers) committed to build 1410 MW of
OCGT and CCGT (Combined Cycle Gas Turbines) diesel fuelled power stations
before 2014 (IRP 2010 revision 2).
New build options listed in IRP 2010 revision 2 amount to 2370 MW for gas fuelled
CCGT and to 3910 for diesel fuelled peak OCGT.
“CCGT 2019 to 2021: Building gas-driven CCGT power plants requires the creation of
gas infrastructure. In addition to the CCGT power plants, a LNG terminal needs to be
decided on unless a suitable domestic supply is developed, and built together with the
associated gas infrastructure. To trigger these decisions and investments and to
ensure that the first CCGT capacity is available by 2019, a firm commitment to
building the CCGT power plants is required, which will create the necessary demand
to ensure appropriate utilisation of the new gas infrastructure”. IRP 2010 revision 2.
The estimated annual gas use at 60% efficiency and 60% utilisation is 2 billion m3
which is equivalent to 3.3 million m3 of LNG imports, which would amount to about 25
shiploads at a load of 120000 to 140000 m3.
Future demand
Industrial heat
Replacement of coal fired boilers with NG. Includes option for
cogeneration (Combined heat and power CHP)
A prerequisite is the availability of a NG grid infra structure and
connections to industrial sites, office buildings, housing blocks
etc. Research is required to determine the potential for this
fuel switch. Important issues are the economic aspects,
reduction in air pollution, fuel savings, and reduction in GHG
emissions.
Domestic heating, cooking
For domestic heating and cooking similar aspects apply as for
industrial applications. Local differences have large impact on
the financial viability of a gas grid e.g. the availability of
conventional fuels such as coal and firewood, the density of
the population, the distance from the NG supply etc.
NG for transport
Due to its physical properties large quantities of NG
are transported by ship in its liquid state (Liquid
Natural Gas, LNG). Smaller quantities are used in
high pressure containers typically at 250 bar
(Compressed Natural Gas CNG).
CNG is increasingly used as a fuel in road transport,
but as the energy density is relatively low, it is mainly
used in large vehicles such as buses.
If South African resources are exploitable at
reasonable cost, part of it could be used as fuel for
road transport.
Infrastructure requirements
Levelized cost of electricity (LCOE), R/MWh
Source: Mac consulting
Medupi coal-fired electricity is said by
Eskom to cost R 490/MWh, but with
financing costs and costs over-runs this
has been estimated as high as R
970/MWh.
3000
2500
2000
1500
1000
Only if
private, not
Eskom
800
2,512
1,645
970?
897
480
500
490
0
Gas at
$10/MBTU
Medupi
Wind
Solar PV
Solar CSP
Latest awards in South Africa's Renewable
Energy Independent Power Producer
Programme
Levelized cost of electricity (LCOE), R/MWh
Source: Mac consulting
3000
2500
2000
1500
Projected carbon tax
2035
1000
500
0
Gas at
$10/MBTU
Medupi
Wind
Solar PV
Solar CSP
Carbon dioxide emissions using coal or gas
as primary energy source
Energy content per weight:
– Coal 18 -26 MJ/kg
– NG 50 MJ/kg
CO2 emissions per MJ (Australian LCA study)
– Coal
950 gr CO2e/kWhe 35% thermal efficiency
– NG (cc) 440 gr CO2e/kWhe 53% thermal efficiency
Direct use of gas for heating purposes
– 230 gr CO2/kWh (3.6 MJ)
– 25% of coal based electricity assuming same heating
efficiency and no gas losses
Compatibility of natural gas with renewable
energy in electricity production
Renewable energy is available as nature provides it,
but is not a function of demand. Therefore demand
and supply are not matched.
NG for power supply is suitable for matching
demand and supply as:
– Low capital cost for NG plants
– Short response time compared with coal and nuclear
EPRI combined plant design
Research needs
Cost of infrastructure.
Cost comparison of landed gas and exploitation of resources.
Exploitation of shale gas.
Identification of pipeline trajectories as well as harbours for
LNG.
Change in CO2 emissions by replacing coal with gas.
How to increase LPG supply.
Piloting CNG for road transport.
Increased use of biogas
Barriers that prevent grid access to small electricity producers
using e.g. biogas
Conclusions
Replacement of coal with gas has many benefits ranging
from a reduction in in-house air pollution, reduction in
carbon dioxide emissions to AMD and coal waste.
However significant infrastructure is required
The economics of gas use need to be viable
Email:sibbeleh@sanedi.org.za
Phone: 010 201 4710
Website: www.sacccs.org.za