Exxon Mobil Corp. (NYSE:XOM) has struck a preliminary deal to supply liquefied natural gas to South Africa, according to reporting that cited people familiar with the matter. Under the terms described, state utility Eskom Holdings SOC Ltd. would import LNG at the proposed Zululand LNG terminal in Richards Bay, an industrial port city on the countrys east coast.
The gas would be directed to a nearby power station planned to have a capacity of 3,000 megawatts. That plant has not yet been constructed, and the terminal at Zululand remains a proposed project rather than an operational facility.
South Africa has endured years of intermittent blackouts and is pursuing steps to improve the reliability of its electricity system. At the same time, the country is seeking to lower emissions by shifting away from coal, which currently supplies about 80% of South Africas power generation. The proposed LNG imports are presented as part of that effort to reduce reliance on coal while addressing short-term supply constraints.
For Exxon, the arrangement aligns with a broader strategy to materially grow its LNG exports. The company has set a goal to double LNG supplies to more than 40 million tons a year over the decade through 2030. Recent progress toward that target includes the start-up of the Golden Pass export terminal on the U.S. Gulf Coast.
Exxon has signaled that it will make final decisions later this year on whether to move ahead with construction of similar LNG facilities in Mozambique and Papua New Guinea. Those impending decisions underscore that some elements of the companys expansion plans remain subject to future approvals and project execution choices.
Key points
- Exxon reached a preliminary agreement to supply LNG that would be imported at the proposed Zululand terminal in Richards Bay and used at a planned 3,000-megawatt plant.
- The initiative supports South Africas efforts to improve electricity reliability and to reduce emissions from coal, which accounts for roughly 80% of the country's current power mix.
- For Exxon, the deal advances its aim to expand LNG output toward more than 40 million tons a year by 2030, following the start-up of Golden Pass on the U.S. Gulf Coast.
Risks and uncertainties
- The Zululand terminal and the 3,000-megawatt power plant are still proposed or unbuilt, leaving timing and completion uncertain - a risk for utilities and energy project investors.
- Reliance on a transition fuel while reducing coal use introduces execution and policy risks for South Africas power sector, which must both improve reliability and cut emissions.
- Exxons broader LNG expansion depends on future decisions, including planned final investment choices later this year on projects in Mozambique and Papua New Guinea.