South Africa: Gas-to-Power Project Awards Fail Over Supply

• South Africa failed to award any gas-to-power projects in its initial procurement round, despite receiving bids for 2,830MW against a 2,000MW target.
• The primary reason for the failure was the inability of bidders to provide sufficient gas supply assurances, highlighting a lack of domestic production and LNG import infrastructure.
• The setback further delays the country's Integrated Resource Plan 2025 goals to replace 8GW of coal with 6GW of gas by 2030.
• Eskom faces its own challenges, including a legal dispute over a planned gas plant and a five-year wait for gas turbines, which would miss IRP deadlines.
• Minister Kgosientsho Ramokgopa confirmed the government's commitment to gas-to-power, focusing on addressing underlying infrastructure, commercial, and institutional conditions.

Our responsibility now is to address the infrastructure, commercial and institutional conditions required to translate market interest into viable and deliverable projects.

South Africa's ambitious plans to diversify its energy mix and reduce reliance on coal have hit a significant roadblock, as the nation failed to finalize awards in its initial gas-to-power procurement round. This setback threatens to impede the country's energy transition efforts, which aim to shift away from its current heavy dependence on coal-fired generation. The government's auction process, designed to secure electricity from gas-fueled power plants, was initiated a year ago, with proposals formally accepted in May.

Despite the procurement round seeking 2,000 megawatts (MW) of capacity, the Department of Electricity and Energy confirmed that four bids were received, collectively offering a substantial 2,830MW. However, the primary reason cited for the inability to proceed with awards was the bidders' failure to provide the necessary level of assurance regarding their gas supply. This critical deficiency highlights fundamental challenges within South Africa's energy infrastructure and supply chain.

The inability of prospective power producers to guarantee gas supply stems from South Africa's current energy landscape, which, despite potential domestic natural gas endowments, relies heavily on external sources. The majority of the country's gas requirements are imported from Mozambique via a pipeline, a supply route that is increasingly precarious due to declining output from Mozambican gas fields. This dependency is further complicated by South Africa's complete lack of liquefied natural gas (LNG) receiving terminals, which are essential for processing imported LNG.

The Department of Electricity and Energy explicitly noted that the absence of such specialized facilities means that even if LNG were procured, there would be no means to receive it. Plans for developing LNG import infrastructure are still in their nascent stages, and these projects typically require significant commitments from anchor offtakers to become commercially viable and progress. This structural gap in South Africa's energy infrastructure presents a major hurdle for any large-scale gas-to-power initiatives.

This procurement failure occurs against the backdrop of South Africa's broader energy strategy, which aims to significantly transform its electricity generation profile. The nation currently generates approximately 80% of its electricity from coal, making it one of the most carbon-intensive economies globally. The Integrated Resource Plan 2025 (IRP 2025) outlines a strategic move to decommission 8 gigawatts (GW) of coal-fired capacity by 2030.

Crucially, the IRP 2025 also envisioned replacing a substantial portion of this capacity with 6 GW of gas-powered generation. However, the implementation of these gas-fired projects has already fallen behind schedule, even before the recent procurement setback. The persistent challenge of securing a reliable and sufficient fuel supply for these plants remains a central obstacle to achieving the country's stated energy transition goals.

State-owned utility Eskom, a key player in the country's electricity sector, had the environmental authorization for its proposed gas plant nullified by the Supreme Court of Appeal in September 2025. This legal entanglement adds another layer of uncertainty to the development of new gas-fired capacity.

Furthermore, Eskom has highlighted significant logistical challenges, including an estimated five-year waiting period for the delivery of gas turbines from major international suppliers such as Siemens AG and General Electric Co. Such extended timelines for critical equipment acquisition mean that even if other hurdles were overcome, these projects would likely miss the deadlines stipulated in the Integrated Resource Plan, exacerbating the Integrated Resource Plan 2025 gas delays.

Despite these considerable setbacks and the South Africa gas-to-power project award failure, the government maintains its commitment to gas as a crucial component of its future energy mix. Minister of Electricity and Energy, Kgosientsho Ramokgopa, affirmed that the country is not abandoning its gas-to-power objectives. He emphasized the immediate priority is to establish the necessary foundational conditions.

Minister Ramokgopa stated, "Our responsibility now is to address the infrastructure, commercial and institutional conditions required to translate market interest into viable and deliverable projects." This statement underscores a recognition of the deep-seated SA electricity procurement challenges and the need for comprehensive solutions beyond just procurement rounds, including addressing South Africa LNG import infrastructure and the broader Kgosientsho Ramokgopa gas strategy.

Lawyers advising energy sector clients or those with significant energy consumption in South Africa should anticipate continued delays and uncertainties in the country's gas-to-power transition, necessitating robust risk assessments for project development, investment, and long-term energy supply strategies. Compliance officers should monitor the evolving regulatory landscape and infrastructure development for potential impacts on energy security and operational planning.

Source: Original reporting via Department of Electricity and Energy statement.