South Africa’s Energy Bet: From Gas Terminals to Faster Oil & Gas Rules
South Africa is being forced to rethink its energy strategy after shocks that began far beyond its borders began biting the local economy. Minister of Mineral and Petroleum Resources Gwede Mantashe used a recent address in Cape Town to argue that the continent cannot afford energy poverty when it sits on substantial resources.
He told delegates at the Southern Africa Oil and Gas Conference that Africa must use oil and gas responsibly to support inclusive growth, create jobs, and reduce poverty. His message was also aimed at those who believe regulatory and legal barriers slow down development to a crawl.
Mantashe’s stance marked a notable shift from past conference commentary where he often pointed to geopolitics and foreign interests as obstacles. This time, he focused on the idea that uncertainty—especially uncertainty caused by prolonged court battles—can scare off investors.
Speaking directly about the need for speed, he said South Africa must avoid projects being “indefinitely suspended” by lengthy litigation. In other words, the state must reduce delay risk if it wants capital to move.
Mantashe’s remarks also came against a background of turbulent global oil dynamics. Shipping disruption, heightened geopolitical tensions, and war-related instability around key supply routes have pushed international fuel markets into volatility—one of the reasons local consumers are feeling it quickly.
Oil and gas uncertainty, and why SA can’t wait
Industry figures at energy events have been sounding similar themes: diversify supply, secure infrastructure, and stop treating local production as a distant dream. One clear example came from Oliver Naidu, president of Vopak’s South African business unit, who spoke earlier this year.
Naidu is project owner of the Zululand Energy Terminal, a LNG facility described as the first of its kind in southern Africa. He argued that a country cannot rely on a single supply source, especially when global disruptions can rapidly become domestic crises.
“You cannot have a single point of supply in your country,” Naidu said. He added that energy planning needs a mix—imported supply alongside local production—to build resilience and reduce dependence on one external pipeline of fuel.
That approach sounds practical when viewed against South Africa’s current reality as an import-dependent market. When international prices spike, local consumers do not get much time to adjust. Fuel costs are effectively transmitted almost immediately through global benchmarks and currency movement.
With Brent crude recently surging past the $100-per-barrel threshold and maritime insurance costs rising after disruptions around the Strait of Hormuz, the cost of imported energy has intensified. The result is imported inflation, hitting transport, manufacturing, and even food supply chains through logistics costs.
Airlines have been among the most visible victims. Kirby Gordon, marketing chief at FlySafair, described how Jet A-1 fuel prices jumped roughly 70% in a single week. The airline said it introduced a labelled, temporary surcharge—not as a profit mechanism, but to keep operations running.
Fuel price shocks are also rippling into industrial sectors, where energy is not just an operating line item but a factor embedded across the value chain. Malcolm Curror, CEO of United Manganese of Kalahari, pointed out that higher fuel costs quickly spread into freight rates and eventually product pricing.
To limit exposure to diesel, the company said it is restricting road transport for ore, even if that affects export volumes. Given South Africa’s position in global manganese supply for steel and batteries, these energy-driven choices can have broader market consequences.
Deindustrialisation and the refinery gap
Behind South Africa’s vulnerability is a structural problem—its downstream refining capacity has shrunk and become less reliable. Analysts often describe this as a form of deindustrialisation, where the ability to turn local crude and gas into usable products has been weakened.
Historically, South Africa had a refining capacity of more than 700,000 barrels per day (bpd) across six refineries. Today, capacity is down to roughly 35% of that figure, and the country buys about 70% of its fuel needs as finished petroleum products.
Some facilities remain active but at reduced levels. Natref refines around 108,000 bpd, Astron Energy processes about 100,000 bpd, and Sasol’s Secunda CTL operation contributes roughly 150,000 bpd from coal-to-liquids.
Other refineries have either paused or been repurposed. The Sapref refinery in Durban, once supplying 35% of national refining capacity, was indefinitely paused in 2022 after flooding in KwaZulu-Natal. Enref, which refined about 120,000 bpd, later faced a fire in 2020 and was converted into an import terminal.
One catalyst repeatedly cited for this decline was the corporate dispute over the Cleaner Fuels II (CF2) regulations. The rules required expensive upgrades to aging plants to meet Euro 5 standards and align with newer vehicle emissions needs.
Oil majors argued the retrofits were not financially viable without state support or cost-recovery mechanisms. When financial assistance became a sticking point, plants closed and the business model shifted further toward importing CF2-compliant fuel rather than refining locally.
That pivot has exposed a second weakness: strategic fuel storage. South Africa’s Strategic Fuel Fund reportedly manages 45 million barrels of physical storage at Saldanha Bay, but storage alone is not enough when operational refineries are not available to convert crude into petrol and diesel.
A parliamentary oversight visit highlighted a troubling mismatch. Only two of the six large concrete tanks (each around 7.5 million barrels) were dedicated to national reserves. The remaining tanks were leased commercially to international oil traders to generate revenue for the fund.
A looming gas cliff and the scramble for sovereignty
South Africa also faces a gas cliff as early as 2028. The country depends heavily on natural gas from Mozambique’s Pande and Temane fields. Sasol has warned it will stop supplying external industrial customers by 2028 due to resource depletion.
Industry watchers say the impact could involve 70,000 to 100,000 jobs across parts of manufacturing that rely on stable gas feedstock. Sasol supplies about 30% of domestic fuel needs, but local operations are also constrained by current market capacity.
While South Africa may have promising hydrocarbon potential beneath the Karoo, extracting it has been slowed by administrative and legal problems. On the offshore side, companies have faced economic barriers too.
TotalEnergies, for instance, reportedly proved an estimated one billion barrels of oil equivalent in the Outeniqua Basin, but formally exited the block in July 2024. The company said developing deepwater infrastructure and monetising gas would be too difficult without sovereign pricing guarantees, essentially requiring the kind of state support oil majors often argue they need.
Instead, major operators leaned into other basins. TotalEnergies and QatarEnergy have shifted attention to the Orange Basin, closer to Namibia’s success story in drilling activity. By some accounts, South Africa has recorded zero exploration wells since 2022, while Namibia has drilled more than 20.
Environmental safeguards—or “lawfare”?
Mantashe has also framed part of the delay as a moral and political challenge. He argues that rising global oil and gas prices translate into direct pressure on the cost of living, and that blocked access to energy can worsen unemployment and deepen inequality.
He claims that environmental objections have become a barrier to full exploration and development. But the state’s environmental authorities insist the opposite: regulation is meant to ensure development is responsible and sustainable.
Willie Aucamp, Minister of Forestry, Fisheries and the Environment, said environmental legislation is not designed to stop progress but to ensure long-term resilience. He emphasised the balancing act South Africans want—economic growth without sacrificing environmental protection.
In the background, regional experts argue South Africa’s risk could be reduced through cooperation. Selma Shimutwikeni, CEO of RichAfrica Consultancy and convenor of the Namibia International Energy Conference, suggested pooling infrastructure and expertise—ports, pipelines, logistics hubs, and skills programs—rather than duplicating expensive builds country by country.
Speeding up the rules, building the pipeline, and reviving supply
On the policy front, Mantashe wants faster implementation of the Upstream Petroleum Resources Development Act, signed into law in 2024. The act separates petroleum regulation from mining, which the minister says should speed up exploration by clarifying pathways for investors.
Another major shift is linked to the October 2025 lifting of the 2011 moratorium on shale gas exploration in the Karoo Basin. Estimates place technically recoverable gas at around 200 trillion cubic feet, but turning resources into energy output will depend on political will, regulatory execution, and financing.
Infrastructure is also being pushed. Plans involve LNG-related developments anchored through import terminals at Port of Ngqura and similar efforts targeting Richards Bay and Saldanha Bay. Gas is viewed as a potential stabiliser alongside renewables, providing baseload support when wind and solar output fluctuates.
Yet LNG is not a magic fix. Energy analysts warn that without underground geological storage, LNG peaking power becomes expensive. There is also the broader issue of stranded asset risk if carbon pricing tools spread further, including Europe’s CBAM system, which could penalise carbon-intensive operations.
Still, the most ambitious concept involves a move to restart refining capacity. The Central Energy Fund is reportedly seeking to acquire the shuttered Sapref refinery for a nominal R1, then upgrade it into a mega-refinery over five years. If that happens, it could dramatically change South Africa’s ability to buffer against global fuel price shocks—though the feasibility depends on capital, skills, and political consistency.
For now, the clearest message from the current energy debate is that South Africa’s exposure to war-driven price spikes and shipping disruptions has revealed the fragility of its energy system. If the crisis caused by Operation Fury teaches the country anything, it should be this: the shift from dependence to resilience must happen quickly—and with fewer delays than before.