Deal Signed For South Africa Gas Project

The agreement involves developing a 500MW onshore liquefied natural gas scheme.

By Sneha A on
23rd August 2023

The Industrial Development Corporation (IDC) of South Africa has signed a non-binding term sheet with the local Afro Energy to jointly develop a 500MW onshore liquefied natural gas (LNG) power plant. 

Under the terms of the agreement signed on 22 August, the firm will use its granted exploration right (ER271) to develop the first stage of of the project, to deliver 50MW gas equivalent energy from the Amersfoort gas field, located south of the Mpumalanga province. 

The 1st stage is estimated to cost about ZAR1.68 billion (US$89.59 million), with equity comprising 65% or ZAR1.09 billion (US$58.12 million) and debt 35% or ZAR590 million (US$31.46 million). 

The IDC will invest equity of ZAR630 million (US$33.59 million) for a 30% share of the equity in the first stage, divided into ZAR435 million (US$23.19 million) on the effective date of the shareholders’ agreement and ZAR195 million (US$10.39 million) on successful completion of the bankable feasibility study. Afro Energy will invest the remaining ZAR456 million (US$24.31 million) for a 70% share of the equity.

The IDC will provide debt funding of ZAR210 million (US$11.19 million) on successful completion of the bankable feasibility study and will underwrite equity shortfall on Afro Energy’s 70% equity portion, restricted to 49.99% of the equity. 

“This is a step change in the scale of the company’s development and represents a national project to support South Africa’s transition to cleaner, reliable, affordable energy,” said Kinetiko Energy CEO Nick de Blocq, which partly owns Afro Energy. “[The term sheet] is expected to expedite all state and government-related processes in terms of permitting, licensing and minimising of red tape.” 

The first stage, or block 1, is estimated to take two to three years to develop and the second stage, involving further blocks equalling 450MW of LNG gas equivalent energy, will be developed over 9-10 years. 

The IDC intends to fund 30% of the second-stage development, which, if realised, will constitute the largest onshore LNG project in South Africa. The corporation also has the option to participate in the co-development of further 1,000MW LNG gas equivalent energy projects totalling 1.5GW. 

Australia-based Kinetiko Energy is a 49% shareholder in Afro Energy, with talks ongoing to fully own the firm. The other 51% is owned by the local Badimo Gas.

Kinetiko Energy is focused on commercialising advanced shallow conventional gas and coal bed methane projects in South Africa through Afro Energy’s three exploration licences – ER270, ER271 and ER272. According to an August update published by the company, its gross contingent gas resources have increased by about 20% to 6 trillion cubic feet in its pilot gas production field.  

Afro Energy exploration rights
Afro Energy exploration rights in South Africa. Source: Kinetiko Energy

Top photo: Gas pipeline (© Jim Parkin |

Add a comment

ConstructAfrica welcomes lively debate, but will not publish comments that are threatening, libellous or abusive.

Plain text

  • You can align images (data-align="center"), but also videos, blockquotes, and so on.
  • You can caption images (data-caption="Text"), but also videos, blockquotes, and so on.
  • Web page addresses and email addresses turn into links automatically.
  • Allowed HTML tags: <a href hreflang> <em> <strong> <cite> <blockquote cite> <code> <ul type> <ol type start> <li> <dl> <dt> <dd> <h2 id> <h3 id> <h4 id> <h5 id> <h6 id> <img src alt data-entity-type data-entity-uuid data-align data-caption>