South Africa will invest more than R50.3bn ($3.7bn) at two of its largest ports building to build infrastructure for a gas-to-power program aimed at easing the country’s dependence on coal.

A plant at Richards Bay, on the east coast will generate 2,000MW of electricity from liquefied natural gas (LNG) imports. The second at the Coega industrial development zone, at Port Elizabeth in the south, will produce 1,000MW, says the SA Department of Energy.

The government will seek bidders to manage the projects, underpinned by a 20-year power-purchase agreement with state utility Eskom Holdings SOC Ltd.

A Gas Industrialization Unit was established six months ago to implement the country’s 3,726-megawatt gas-to-power program in the wake of a series of managed blackouts last year.

A reliable power supply is the foundation for growth in Africa’s most-industrialised economy. Bottom of Form

By importing LNG, the government can take advantage of low prices for the fuel while reducing reliance on coal.

Karen Breytenbach, head of the Independent Power Producer Procurement Program's office, in Cape Town Reports issued a statement saying Richards Bay will initially require an annual 1m metric tonnes of LNG and Coega 600,000 tonnes.

The ports each need R25bn ($1.84bn) in infrastructure, she said. The program will look to hedge the cost of the LNG, which is priced in dollars. The cost of the power will be passed on to consumers through electricity tariffs.

Bloomberg News reported that South Africa will use vessels offshore to receive, convert and store the LNG it imports, avoiding the risk of gas plants becoming "stranded assets" if the country starts producing its own gas, Breytenbach said. It will also be quicker to use marine facilities, and onshore plants could follow if needed, she said.

The nation’s ability to transport gas overland is currently limited by poor pipeline infrastructure, but LNG can be sent by road and rail as a “temporary solution,” according to the Energy Department.

The gas-to-power program “is designed to ensure that the LNG import and re-gasification facilities are complementary to the development of indigenous gas and/or development of a regional gas pipeline network,” the department said.

Bidders to manage the port projects will be pre-qualified in April after making submissions in February. The final request for proposals is expected next August, according to the department.

Apart from the 3,000MW generated at the ports, the program will produce a further 726MW from other projects.

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