Transnet signs cost-sharing deal to develop South Africa’s natural gas infrastructure

14910508555 508ec01f7d zFreight logistics firm Transnet has entered into a cost-sharing agreement with World Bank Group’s International Finance Corporation (IFC) to conclude a feasibility study for the development of an LNG storage and regasification terminal in Port of Richards Bay, South Africa

Transnet has identified significant industrial demand for natural gas and opportunities to leverage its ports, pipelines and rail assets to facilitate private investment in South Africa’s gas infrastructure.

According to the firm, this initiative is intended to unlock a backbone of the country’s natural gas network infrastructure to serve existing and growing gas markets, consisting mainly of industrial and commercial off-takers located in the provinces of KwaZulu-Natal, Mpumalanga, Free State and Gauteng.

The aim is to facilitate private sector investment and partnerships with other state-owned companies (SOCs) to develop South Africa’s natural gas infrastructure.

The Richards Bay Natural Gas Network (NGN) project will complement the delivery of LNG to new markets in the Eastern Cape and Western Cape provinces through Ngqura and Saldanha Bay ports, respectively, and will support future gas-to-power projects by the government.

The LNG terminal will be developed by private investors who will be selected to own a majority stake in a planned special purpose vehicle (SPV) through a competitive process. Transnet and other SOCs will also take part in the SPV. It is expected that the facilities will be operational by 2024.

The expected expansion of South Africa’s natural gas networks will help modernise the region’s energy use and increase access to cleaner, reliable and affordable natural gas for end consumers.

The NGN project includes the LNG storage and regasification terminal in Port of Richards Bay, plans to repurpose Transnet’s Lily Pipeline and Durban-Johannesburg Pipeline for the transmission of natural gas, and the establishment of virtual LNG pipelines to be transported by rail and road to various markets by 2024.

As part of the cost-sharing agreement, the IFC has committed US$2mn. This will help Transnet complete the feasibility study, set up the SPV, and inform the market about the transparent and public process to select the private investor.

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