Eskom and Zululand Energy Terminal have signed a Heads of Agreement that could become one of the most important developments in South Africa’s energy transition strategy.
The agreement positions Eskom as the “foundation customer” of the proposed Zululand Energy Terminal in Richards Bay, a liquefied natural gas (LNG) import facility that is expected to supply fuel for Eskom’s planned 3,000MW gas-to-power programme.
At first glance, the announcement appears to be another infrastructure agreement. In reality, it addresses one of the biggest questions facing South Africa’s energy sector: what fills the gap between coal and a future dominated by renewable energy?
Solar and wind capacity continue to expand rapidly across South Africa. However, these technologies produce electricity only when the sun shines or the wind blows. Grid operators therefore require dispatchable generation sources that can be turned on when renewable output drops and electricity demand remains high.
That is where gas enters the equation. Under the Integrated Resource Plan (IRP) 2025, South Africa intends to add 6,000MW of gas-fired generation by 2030. Half of that capacity is expected to come from independent power producers, while the remaining 3,000MW will be developed by Eskom.
The Richards Bay project forms the centrepiece of Eskom’s contribution. The planned power station will be located within the Richards Bay Industrial Development Zone and is expected to operate for approximately 25 years. The facility will use imported LNG that is stored and regasified at the Zululand Energy Terminal before being transported to the power station for electricity generation. For Eskom, securing access to LNG infrastructure is critical. Without guaranteed fuel supply, large-scale gas generation remains a concept rather than an operational asset.
The Zululand Energy Terminal itself is being developed through a partnership between Royal Vopak’s South African subsidiary, Reatile Group, and Transnet Pipelines. The project was awarded a concession by the Transnet National Ports Authority to develop, construct and operate the LNG facility.
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Eskom Group Chief Executive Dan Marokane described gas as a bridge fuel that allows South Africa to expand renewable energy while maintaining system reliability. The utility argues that gas-fired generation will help reduce dependence on diesel-powered peaking plants, lower operating costs, and provide flexibility when renewable generation fluctuates.
The project also carries broader economic implications. South Africa faces what industry participants increasingly describe as a “gas cliff” as existing regional gas supplies decline over the coming years. New LNG import infrastructure could support not only power generation but also industrial users that rely on natural gas for manufacturing and processing activities.
The signing of the agreement does not mean construction begins immediately. Regulatory approvals, commercial agreements, financing arrangements and final infrastructure planning still need to be completed.
However, the deal marks an important milestone in South Africa’s attempt to build an energy system that relies less on coal without compromising grid stability. As renewable capacity grows, the debate is no longer whether the country needs backup generation. The question is whether the necessary gas infrastructure can be built quickly enough to support the transition.
By Thuita Gatero, Managing Editor, Africa Digest News.
