Nersa outlines gas pricing plan

Dane McDonald

Cape Town - The pricing mechanism for SA's natural gas programme will be informed by national consumption statistics, according to a National Energy Regulator of SA (Nersa) official.

Nomfundo Mastei said Nersa has developed five methodologies for the pricing of gas molecules.

"... (This is) so the investor can choose a methodology that suits its needs," she said. Mastei was addressing stakeholders and government delegates at the Gas Options meeting in Cape Town on Wednesday.

Industry leaders are engaging with the Department of Energy on its independent power producer programme to deliver 3 126 MW of gas-fired power generation.

According to Mastei, the pricing mechanism is informed by South Africa's national consumption statistics.

Three factors will contribute to the price of gas, she said, defining them as the price of the gas molecules, the tariff, and the trading margin.

Mastei said an appropriate pricing index is being explored.

Mukund Dhar, a partner at international law firm White & Case, weighed in on the panel discussion, asking whether pricing options will be indexed to crude oil or the US Henry Hub natural gas index.

Dhar raised the issue of how the index would be treated in terms of SA's regulatory framework, and cautioned against the potential disconnect between the regulatory framework and the pricing index.

Renato Pereira, vice-president at LNG developer Cheniere, advised Nersa to encourage as much competition as possible to attract LNG investment.

"Do as little as possible, let the market work," he said.