South Africa releases PIM for LNG to IPP Procurement Programme

South Africa has released a Preliminary Information Memorandum (PIM) regarding the Liquefied Natural Gas (LNG) to Power Independent Power Producer (IPP) Procurement Programme.

As part of the overarching governmental effort by the Minister and Department of Energy of South Africa (DoE) to ensure that the country has affordable, accessible, sustainable and secure supply of energy, the Determination issued on 18 August 2015 outlines the procurement of 3,126 MW of new IPP gas fired generation capacity to be generated from a variety of gas sources. Subsequently on 22 March 2016, the Minister of Energy made a further Determination for an additional 600 MW.

To give effect to the Determination, the DoE will shortly be initiating a LNG-to-Power IPP Procurement Programme for 3,000 MW of electrical capacity, with an opportunity to also supply additional gas into a nascent gas market.

The first phase of the programme will be focusing on two locations, namely Richard Bay in KwaZulu-Natal Province and Ngqura (Coega) in the Eastern Cape Province. The DoE will allocate 3,000 MW between the two ports: 1,000 MW to Coega and 2,000 MW to Richards Bay.

The LNG-to-Power IPP procurement programme will provide the anchor gas demand to the new LNG import and re-gasification facilities at the two ports. This in turn will provide the basis for the development of LNG import, storage and re-gasification facilities to be made available for use by other parties on a mandatory third party basis.

The projects at each of the ports will be developed on an integrated basis under the umbrella of a single private sector SPV, which will bear full responsibility for the design and development of the marine and land-based infrastructure, including financing thereof, and the supply of the LNG.

The DoE has undertaken pre-feasibility level studies in relation to the suitability of the ports’ locations, a site assessment for power generation sites and has commenced with environmental impact assessment studies and it will make all the site related information available during the Request for PreQualification (RFQ) stage of the procurement process. Bidders will be expected to assume all site development risk, including obtaining and/or finalizing necessary consents and permits. Bidders will also have an opportunity to undertake due diligence of the preparatory studies as part of the procurement process.

The issue of the RFP is expected to take place in November 2016.