ONO comments on the Gas Master Plan : Basecase Report (V01)
Given that the true base case to this report involves:
- The top part of the ocean is warming up 24% faster[i] than it did a few decades ago, and this is accelerating. Most of the trapped heat and carbon from GHGs being absorbed by the oceans. Corals are bleaching, spitting out the algae that live in them. With no algae, there is no food for fish. 40% of coral species have died. This has a knock-on effect all the way up the food chain. When fish die, we have less to eat.
- From absorbing the carbon from the greenhouse gases, the ocean has become more acidic. This leads to movement in the water column slowing down. Instead of cyclical movement, the water becomes stagnant. This means there is less oxygen. Without oxygen even more species die.
- The IPCC in the Special Report on the Ocean and Cryosphere in a Changing Climate lists ocean deoxygenation and ocean acidification as irreversible for centuries to come[ii] and makes achieving the 1.5°C target more difficult to achieve.[iii]
- Storms get bigger and sea levels rise due to melting ice and expanding water. Warm oceans make hurricanes and cyclones more intense. Once rare, extreme events are likely to occur in Southern Africa now every year. In 2019 two cyclones, within the same season, battered southern Africa, killing over a thousand people and leaving over two and a half million people in need of humanitarian assistance.
- Due to global warming, the climate has changed. South Africa is getting hotter at twice the global average. We experience this as heatwaves, huge rainfall variability – water shortage and drought, and then flooding. This causes problems in the soil (moisture levels) and land loss. Agriculture becomes difficult, which leads to crop failure and food insecurity. Meissner et al (2013) have warned of the threats to our beef and maize industries. Food prices go up and people will face either leaving their homes, or starving.
- Climate change will increase inequality and poverty. The fight for survival deepens social tension and unrest. It leads to conflict and wars.
We can say with confidence that the petroleum industry has now threatened life on earth.
The foundation of this mega-build is methane. That this plan seeks to extract more is no practice in development. Assessing the systemic risks of the Gas Master Plan in relation to the climate crisis it is clear that it will increase climate harms, economic costs, injustice and will undermine the immediate realisation of viable alternatives. This ecological crisis demands ingenuity and imagination that only thinks with earth systems, replacing fossil fuels with renewable energy sources such as solar, wind, tidal, gravity and wave energy, hydroelectric, biomass and geothermal power. To get caught in the loop of using what gas reserves we have simply locks another fossil fuel in to our emissions trajectory. Like asbestos, fossil gas is a resource that climate science insists must stay underground. As such, we object to the report, and the plan, in its entirety.
Given the existential issues at play that cannot be easily undone, it is insulting how badly compiled the report is. It is founded on unreliable assumptions, makes false claims, contains many inconsistencies, lacks thorough, peer-reviewed background research and planning. Our hope is that that the Department of Mineral Resources and Energy does the intensive, evidence based research to show that gas-for-development is not reparative economics. Gas mastery has lost its legitimacy and is not a game-changer; it is tantamount to unlawful endangerment.
1.Climate change suspension
This report starts from the assumption that current climate conditions will remain stable, which is, at best, unrealistic and, at worst, catastrophic.
To begin development of gas infrastructure at this stage of global warming makes the fundamental assumption that planetary tipping points and accelerating climatic events will wait, while South Africa adds gas to its reliance on coal, and that their consequential greenhouse gas (GHG) emissions will be benign.
2. Delusion of concord
The notion that gas-as-development, particularly oil and gas extraction, converge with the national interest, pervades this document. Given a recurring pattern of the ‘pre-source curse’ effect: increase indebtedness, corruption and instability frequently which follow major oil and gas resource finds, even before production begins[iv], and which is playing itself out in Mozambique currently[v], this needs substantiation.
“In contrast to hopes for development, Mozambicans are now on average poorer than they were a decade ago. 75% of Mozambicans spend less that $1 per day, and 90% are under the international poverty line of $1.90. Cabo Delgado, where the gas projects are based and site of an ongoing violent conflict, has been hit the worst: household spending has dropped by 38% in the last 5 years. Inequality is rising: the richest 10% of population account for 43% of expenditure, while the poorest 10% account for just 0.8% – and are poorer than they were a decade ago.”[vi]
a) The issue of global warming is not broader than the scope of this study and should be centralised within it.
b) How do infrastructural developments dovetail with South Africa’s peak, plateau and decline commitments and timelines? How is net zero by 2050 factored in to the plan?
The Intergovernmental Panel on Climate Change, the “Code Red for Humanity” report[vii] made abundantly clear the urgency of immediate, rapid and large-scale reductions in greenhouse gas emission, therefore the time frame feasibility of developing demand and supply needs urgent, quantitative definition in relation to carbon neutrality:
i)The earliest, ambitious access to local gas is noted to be 2028 from the Brulpadda reserve. What is the logic of ‘transitioning’ to gas after a 6-year delay?
ii)What if we transitioned to renewable energy which took up the gas allocation in the IRP now? Gross Domestic Product gains from complying with the Paris Accord should be calculated (see Kompas et al, 2018) and compared to inform the Gas Master Plan.
4. Gas is needed for peaking
a)Brown et al have shown the feasibility and economic viability of a 100% renewable electricity system for South Africa, meeting the” energy needs of all citizens at all times” is “cost-competitive with fossil- fuel-based systems, even before externalities such as global warming, water usage and environmental pollution are taken into account”. [viii]
They have established that a 100% renewable-electricity system requires no ‘re- invention’ of the power system, rather only a “directed evolution of the current system is required to guarantee affordability, reliability and sustainability”. In far less than the 6 years ( see 1.b.ii) there could be sufficient renewable electricity generation and storage technology to convert entirely to renewables.
OCGTs and CGTs will become obsolete soon with the introduction of batteries and concerted effort to decarbonise the national grid. Also advances in electricity system operation will also lead to less renewable (wind) curtailment, massively reducing the need for back up thermal generation.[ix]
5. Economic Redemption
a) The report claims that adding gas to the energy mix would “rejuvenate an overburdened, outdated energy infrastructure”, “reduce energy shortfalls” and “stimulate the economy by allowing business and industry to lower their energy and operational spend while also creating significant numbers of new jobs“. This needs to be substantiated if,
i)The approaching gas-to-power IPP round has been budgeted at R2.47/kWh, according to Eskom’s Multi-Year Price Determination (MYPD) submission which is significantly more expensive than Eskom’s MYPD renewable energy projects modelled at 79c/kWh? [x]
1)There is no sane reason to justify a move to paying more per kilowatt, especially since renewable costs are decreasing.
2)LPG is too expensive for low-income households, a quarter of whom spend more than 20% of their household income on electricity.[xi]
3) Most unconnected households are rural and many remote, distributed renewables can close more of the gap. The deployment of clean energy can bring substantial co-benefits in terms of access to energy, jobs, and healthcare, contributing in turn to achieving the SDGs.
ii) Gas is going to take longer to meet South Africa’s energy needs than other energy options.
iii) We’re already seeing significant divestment in oil and gas projects around the globe, so how will a just transition within and away from fossil gas be managed, and on what time scale? The risk of stranding further jobs in the fossil fuel industry need very serious consideration.
iv) Why fossil gas when we can employ people in no-carbon, renewable technologies?
The argument that the Gas Master Plan can provide employment (s9.1.3.) can be applied to renewables too. More so if there’s public ownership of renewable energy ensuring the creation of a local manufacturing industry, plus the proceeds being directed into the public purse for reallocation to key government sectors such as health, education and housing. Added benefits of jobs in a socially owned renewable sector are less health challenges, less threat of redundancy from stranded assets, and they contribute to a more just society built on pro-poor imperatives.
b) Any stimulus to GDP growth by the Gas Master Plan is essentially rooted in hydrocarbons that shouldn’t be burnt. Given the costs to climate resilience of the total GHG emissions generated by the Gas Master Plan it should therefore be seen as a capital depreciation.
6. Energy scarcity
This claim for South Africa is absurd and false. South Africa is rich in solar, wind and wave energy. Using gas as a byword for energy, historically and rhetorically, has constrained thinking about sustainable alternatives and creates liberties to pollute. Gas is a fossil fuel driving climate change. The electrical supply system is under severe constraint, which could be de-escalated with the addition of a pro-renewables regulatory regime.
7. Gas as ‘clean’
9.1.5 However, natural gas is a cleaner fuel source compared to its alternatives. The development of natural gas will therefore reduce pollution and improve the general society’s health conditions.
a) Methane is a fossil fuel driving climate change, is not carbon-free thus not clean. It is only a low-carbon fuel at ignition.
Clean is not just a mischievous misnomer, but speaks volumes about the serious, uncalculated social and environmental implications this plan ignores.
b) Recent findings on the extent of methane leakage from gas infrastructure undermine claims of environmental benefits over other fossil fuels[xii] A Natural Resources Defense Council (NRDC) study (December, 2020)[xiii]found that the climate benefit of LNG compared to coal is only modest at best, and because of the leakage inherent in producing the gas and the energy required to cool it and ship it, it ultimately presents a significant threat to the climate.
c) The report makes no comparison with renewables or with energy conservation.
d) The report assumes well-run gas infrastructure and makes no assessment of greenhouse gas emissions or health impacts that would arise from developing a gas economy. Cumulative emissions of nitrogen oxides, carbon monoxide and volatile organic compounds from new fossil gas plants in South African will add to the existing emissions from the coal sector.
The proven reserves and estimated volumes (tcf) vary between maps and in the plan.
9.NEMA potentially undermined
It is envisaged that the development and operation of a gas pipeline infrastructure would follow a streamlined environmental authorization process or would be exempt from environmental authorization within the corridors identified through the SEA process.
- World heritage sites, critical biodiversity areas and other environmental areas of significance cannot be identified and flagged in the SEA, and then be simply ignored. Neither can the right to free, prior, and informed consent of impacted communities be marginalised for the sake of convenience. This section opens this plan up to future litigation and claims for compensation (NEMA s32. 1.(a)-(e)).
- No Strategic Environmental Assessment (SEA) has been done for the offshore oil and gas sector.
This report has glaring omissions. To list them would involve a document bigger than the report. Of immediate concern include:
a). At this stage the report omits to lay out any realistic strategy of action for a just transition.
b) No Cost Benefit analysis.
c) There is no climate risk disclosure. How will the Gas Master Plan achieve decarbonisation targets?
d) How does the Gas Master Plan’s regulatory framework integrate with the national climate change regulatory framework?
e) Potential climate risks to infrastructure need to be anticipated.
11. Lack of Analytical Deployment
As section 1.3 makes clear, a glaring fault of this report is its lack of feasibility study including:
a)Incomplete Market Analysis
i)There is unreasonable uncertainty in reserve quantities, security of supply, proven throughput requirement and actual demand points and financial costs.
ii)End users in the public sector and private sector need to be corroborated.Eskom’s financial instability, uptake and delivery are unconfirmed.
iii)Whether the Brulpadda and Luiperd gas condensate discoveries will lead to commercial production requires verification
iv)Accounting for the geopolitical instability and the absence of logistic infrastructure affecting Northern Mozambique reserves, which is understated in the report, building a Gas Master Plan largely based on this future supply is irrational and foolhardy.
v)There is no provision in these documents for where water will come from for extraction operations.
vi)How the following issues identified by Portfolio Committee on Mineral Resources and Energy on the Oversight Visit to PetroSA, Mossel Bay, dated 02 December 2020, will be dealt with need to be made clear to the public through a Costs Benefit Analysis:
(1)Lack of trust and support in the market for Petro SA;
(2)Unviable gas-to-liquid operating model;
(3)High cash fixed costs and diminishing cash flow;
(4)Low efficiency and sub-optimal plant utilisation;
(6)6-year wait for feedstock from production off Total’s offshore operations;
(7)Disconnection from changing market drivers and value;
(8)Declining profitability and cash flow challenges.
b)The CSIR Strategic Environmental Assessment (SEA) for the development of a Gas pipeline network for South Africa has only conducted public participation in 7 cities/towns in South Africa and may be perceived as exclusionary. The further engagement needed may necessitate revisions to the Report.
c)Economic and financial Analysis
i)The public needs to see the cost analysis of this plan since the burden of the outlay for this build and costs of any potential failure falls on it.
ii)Lack of financial planning leaves this plan as a non-starter.
iii)The report should offer levelized costs of gas against all forms of renewable energy generation to assess and ensure its competitiveness, for the least cost option that meets the socioeconomic objectives set in the IRP of creating jobs, using less water and meeting the 1.5°C Paris Agreement target (SA_TIED, 2021).
iv)How is the conversion of six of Eskom’s older coal power plants to run on gas going to be financed?
v)There is no indication on how converting coal-powered power stations into gas-powered power stations will be financed. The CSIR report indicates that Eskom do not have the resources to do this.
vi)What are the costs of well abandonment and their mitigation. How will monitoring be carried out after production has ceased and throughout de-commissioning, and who will pay for it?
vii)The report needs to consider what the loss or benefit to the local communities, in terms of how existing jobs and livelihoods, an uncontrolled release of hydrocarbons or leak, could be. What compensation would be forthcoming to these communities, including the tourism and environmental sectors, in the event of an accident or spill?
viii)What is the cost of failure of this plan?
i)How is gas price volatility to be managed and how this will impact the price of electricity?
ii)How will demand-side disruption be managed going forward as the global energy transition deepens?
iii)How are significant execution delays going to be managed?
iv)Modelling of costs must be done with meeting Euro 5 emissions standards in mind.
v)It has already been established that South Africa’s subsidy support for Sasol is inefficient and fails to achieve what it sets out to do, namely protect consumers from price shocks (International Institute for Sustainable Development, 2020). Political demand for costly subsidies will add to the country’s debt problems, will reinforce inefficient gas dependency and needs independent review.
vi)This plan has not considered unfavourable gas resource economics:
(1)Social costs of carbon needs estimation in this report, including monetising the impacts on human health and the cost to remedy it.
(2)Stranded assets. New LNG and gas import and distribution infrastructure projects tied to long-term financial agreements have considerable risks of being stranded assets, due to competition from cheaper alternatives, prior to the operating life being complete[xiv]. Credible safeguards against stranding assets must be made plain.
(3)Carbon Border Adjustments Mechanism sanctions imposed by Western trading partners need consideration.
e) Disinclination to Transition
The break-even point of combined-cycle infrastructural development will sit well past 2030 and profits will only be seen in the decades after 2050. The newly created National Petroleum Company, under the supervision of the Minister, blended from iGas, Petrosa, Central Energy Fund (CEF) and the Strategic Fuel Fund into one entity, will play a central role and stand to benefit. So where will incentives for closure and transition from gas to renewables be derived, and what is the logic of development of gas as a transition energy if it is bound to be locked in past 2070?
f) Climate Change Impact Analysis
i)Whether gas can achieve substantial climate benefits in the transition from coal-based electricity is highly contentious[xv]. Considering the need to address these concerns – the primary goal of using gas as an alternative to coal- the greenhouse gas return on investment (GROI) metric should be applied in to address the drawbacks of decision making solely using energy return on investment (EROI) and GHG/kWh since the methodology accounts for the life cycle energy mix, the efficiency, circularity, and supply chain of energy distribution, and the energy offset by a new energy installation[xvi].
There must be assurances that the gas exploration, production and infrastructural development is worthwhile, with their net life cycle greenhouse gases (GHG) per kWh of electricity produced being less than that of coal energy generation, and they must produce more energy over their lifetime than is required for their entire life cycle from cradle to grave.
ii)For a proper accounting, unintentional leakage from the fossil gas system as a percentage (%) of gas activity should reflect the latest evidence-based research.
iii)Climate change and extreme weather events represent a real physical threat to the oil and gas sector, particularly in low-lying coastal areas and areas exposed to extreme weather events[xvii]. The report needs to take climate change seriously, assess its own vulnerability, and take appropriate measures to prevent or mitigate any potentially negative effects. A comprehensive and systemic analysis framework for risk assessment is needed.
12)No proper conclusion
In keeping with the sub-standard presentation, this report makes no conclusions.
[i] Cheng, L., Abraham, J., Hausfather, Z., & Trenberth, K. E. (2019). How fast are the oceans warming?. Science, 363(6423), 128-129.
[ii] Poloczanska, E., Mintenbeck, K., Portner, H. O., Roberts, D., & Levin, L. A. (2018, February). The IPCC special report on the ocean and cryosphere in a changing climate. In 2018 Ocean Sciences Meeting. AGU.
[iii] Hausfather, Z. (2019, 27 June). Analysis: Major update to ocean-heat record could shrink 1.5C carbon budget. Carbon Brief. https://www.carbonbrief.org/analysis-major-update-to-ocean-heat-record-could-shrink-1-5c-carbon-budget
[iv] Frynas, J. G., & Buur, L. (2020). The presource curse in Africa: Economic and political effects of anticipating natural resource revenues. The Extractive Industries and Society, 7(4), 1257-1270.
[v] Gaventa , J. (2021) The Failure of ‘Gas For Development’ Mozambique Case Study. E3G. seehttps://www.e3g.org/publications/the-failure-of-gas-for-development-mozambique-case-study/
[vi] Hanlon, J (2021) Could Mozambique become a hydrogen hub?.Mozambique news reports and clippings.https://www.open.ac.uk/technology/mozambique/sites/www.open.ac.uk.technology.mozambique/files/files/Mozambique_555-1July2021-Mphanda-Nkuwa-and-hydrogen_Special-report.pdf
[vii] United Nations, Secretary-General’s Statement on the IPCC Working Group 1 Report on the Physical Science Basis of the Sixth Assessment, see https://unfccc.int/news/secretary-general-s-statement-on-the-ipcc-working- group-1-report-on-the-physical-science-basis-of-the-sixth-assessment
[viii] Brown, T. W., Bischof-Niemz, T., Blok, K., Breyer, C., Lund, H., & Mathiesen, B. V. (2018). Response to ‘Burden of proof: A comprehensive review of the feasibility of 100% renewable-electricity systems’. Renewable and sustainable energy reviews, 92, 834-847.
[ix] ECF. (2019). Towards Fossil free Energy in 2050, p.6
[x] Comrie, S. (28 Jan 2022) Stepping on the gas: Mantashe’s not giving up on his vision just yet. News24. https://www.news24.com/fin24/economy/stepping-on-the-gas-mantashes-not-giving-up-on-his-vision-just-yet-20220128
[xi] StatsSA. (2012). In-depth analysis of the General Household Survey data. GHS Series. Volume Energy. V .2002–2012
[xii] Swanson, C., Levin, A., Mall, A. (2020) Sailing To Nowhere: Liquefied Natural Gas Is Not An Effective Climate Strategy. Natural Resources Defense Council.
[xiv] Caldecott, B., Harnett, E., Cojoianu, T., Kok, I., & Pfeiffer, A. (2016). Stranded assets: A climate risk challenge. Washington DC: Inter-American Development Bank.
[xv] Myhrvold, N. P., & Caldeira, K. (2012). Greenhouse gases, climate change and the transition from coal to low-carbon electricity. Environmental Research Letters, 7(1), 014019.
[xvi] Reich-Weiser, C., Dornfeld, D., & Horne, S. (2008). Greenhouse gas return on investment: a new metric for energy technology.
[xvii] Cruz, A. M., & Krausmann, E. (2013). Vulnerability of the oil and gas sector to climate change and extreme weather events. Climatic change, 121(1), 41-53.