Economic sanctions made it difficult for apartheid-era South Africa to obtain natural gas and oil. However, South Africa sits on top of one of the world's largest coal reserves, so it used coal as its primary source of energy and in a number of creative ways (from producing a liquid motor fuel to petrochemicals). In this way, despite the sanctions, South Africa found a reliable source of abundant and cheap energy.
Although the sanctions are no longer in place, coal remains the source of 70 percent of South Africa's primary energy supplies and more than 90 percent of its electricity. Through coal-to-liquids technology, coal also provides 30 percent of the country's liquid fuels. Additionally, coal remains a primary feedstock for chemicals production and accounts for 8 percent of South Africa's export revenue.
Renewable energy is a part of South Africa's plan to increase energy resources beyond coal, but the successful development of shale gas would give it a fossil-fuel alternative to coal that is more plentiful and cleaner to use. South Africa is preparing for a shift away from coal and intends to increase its natural gas-based electricity production from 1 percent to 15 percent of the country's supply by 2030. After completing the construction of two coal power plants, Pretoria will not build any new thermal power plants until it decommissions older coal power plants in the mid 2020s. Only after this point will other sources of electricity begin to supplant coal.
Currently, South Africa uses natural gas-to-liquids technology for 15 percent of its liquid fuel supply. Gas-to-liquids and coal-to-liquids are similar technologies in which South Africa is a world leader. The country has already retrofit some coal-to-liquids facilities to handle natural gas as a feedstock and, as it develops its shale gas resources, South Africa will remain at the forefront of gas-to-liquids technology. (Sasol and PetroSA, two owners of South Africa's gas-to-liquids plants, are partnering with major refining companies to expand use of the technology into the United States, Qatar, Nigeria and Canada.)
Natural Gas in South Africa
South Africa consumes between 3 billion and 5 billion cubic meters of natural gas a year. Most of its imported natural gas is delivered through a pipeline from Mozambique. South Africa's southwestern coast — unconnected to this pipeline network — is home to the country's largest gas-to-liquids plant and is a large consumer of natural gas, which it gets domestically from offshore natural gas fields. These fields are declining and are expected to be fully depleted by 2020, which means that South Africa must quickly find an alternative source of natural gas.
On Sept. 7, 2012, Pretoria lifted a moratorium on hydraulic fracturing, rekindling a surge of international interest in the Karoo Basin. The area has an estimated 13.7 trillion cubic meters of technically recoverable shale gas reserves. But developing South Africa's shale resources will be challenging. Hydraulic fracturing requires large amounts of water, and the deposits are located in an area where water is scant. Development also requires significant capital expenditure in drilling, building pipelines and the associated infrastructure.
Moreover, exploration of the basin is in its infancy. International energy companies do not anticipate any production until 2022 at the earliest, and it is unlikely that large-scale production will occur before 2030. These hurdles will not stop the shale gas from being developed — the Karoo Basin does offer a long-term solution for domestic consumption and potential natural gas exports — but they will delay the timetable.
This delay has forced South Africa to explore other possibilities for natural gas supplies to bridge the gap between now and when shale gas production becomes available. PetroSA, which operates South Africa's largest gas-to-liquids plant, is exploring the feasibility of building a floating liquefied natural gas regasification terminal to import natural gas. Another possibility is building another pipeline from Mozambique.
Viewing renewable energy as another way to diversify its sources, South Africa has proactively developed solar, wind and geothermal projects. Renewable energy accounts for about 10 percent of South Africa's energy supply, and Pretoria hopes that almost half of new electricity capacity installed between now and 2030 will come from renewable sources.
In November 2012, South Africa signed $5.4 billion in contracts for the construction of 28 solar, wind and geothermal power plants that will bring 1.4 gigawatts of capacity to the country's electricity grid by 2014-2016. This is part of South Africa's Renewable Energy Independent Power Producers Program, which provides funding and projects for independent renewable energy providers. November's contracts were the first of five rounds of bidding for contracts (the second round will be in March). By 2020, South Africa hopes to increase its renewable energy supply by 7 gigawatts.
The country's electricity grid is already operating at maximum capacity. This has contributed to a 15 percent annual increase in electricity prices since 2008 and created pressure for Pretoria to increase capacity. Because South Africa does not plan to start building more thermal power plants until the mid-2020s, renewable energy sources will be the focal point of Pretoria's electricity policy for nearly a decade.
However, renewable energy can replace coal only in the generation of electricity. Natural gas can offset the use of coal in chemicals and gasoline, for which it is a large feedstock.
South Africa's plan of moving away from coal and toward cleaner sources of energy — both renewables and natural gas — faces some challenges. Lifting the ban on hydraulic fracturing to allow shale gas development and setting aside plenty of money for renewable energy projects will help Pretoria overcome those obstacles. However, coal will remain the core of Pretoria's energy mix while it devotes funding to clean energy and international companies invest heavily in its shale gas development.