Eskom Advances Energy Diversification with Landmark LNG Agreement

South African power utility Eskom has taken a significant step toward securing long-term fuel supply for its proposed 3,000 megawatt gas-to-power project in Richards Bay. On June 5, 2026, the utility signed a Heads of Agreement with Zululand Energy Terminal, establishing Eskom as the foundation customer for what will become South Africa’s first liquefied natural gas import terminal at the Port of Richards Bay.

The agreement provides the commercial foundation for importing, storing, and regasifying LNG to fuel the planned combined-cycle gas turbine plant located in the Richards Bay Industrial Development Zone. This development comes amid ongoing efforts to strengthen energy security and reduce dependence on the country’s aging coal-fired fleet.

Context of South Africa’s Evolving Energy Landscape

Eskom generates the majority of the nation’s electricity and has long relied on coal as its primary source. The utility faces persistent challenges including aging infrastructure, maintenance backlogs, and the need to meet growing demand while transitioning to a lower-carbon mix. Natural gas, including imported LNG, is viewed as a flexible mid-merit option that can complement renewable energy sources and provide reliable baseload or peaking support.

Richards Bay, situated on the KwaZulu-Natal coast, has been identified as a strategic location due to its deep-water port facilities and existing industrial infrastructure. The area already hosts significant heavy industry and benefits from proximity to transmission networks, making it suitable for large-scale power generation projects.

Details of the Proposed 3,000 MW Richards Bay Gas-to-Power Plant

The Eskom Richards Bay project envisions a 3,000 MW combined-cycle gas turbine facility designed to operate for approximately 25 years. Regasified LNG will serve as the primary fuel, with diesel as backup. The plant is intended to run on a mid-merit production profile, meaning it will generate power during periods of higher demand rather than continuously at full capacity.

Key technical aspects include integration with regasification infrastructure at the adjacent LNG terminal. The project aims to support grid stability by offering dispatchable power that can respond to fluctuations in renewable generation. Eskom has emphasized the role of gas in balancing the system while longer-term renewable and storage solutions scale up.

The Zululand Energy Terminal: South Africa’s First LNG Import Facility

Zululand Energy Terminal is a joint venture involving Vopak Terminal Durban, Reatile Group, and Transnet Pipelines. The terminal will be located at Berth 207 in the South Dunes precinct of the Port of Richards Bay. It will handle LNG importation, storage, and regasification, with capacity initially targeting around 2 million tonnes per annum and potential expansion to 5 million tonnes.

In February 2025, the consortium secured a 25-year Terminal Operator Agreement with Transnet National Ports Authority, granting rights to design, develop, construct, finance, operate, and maintain the facility. The terminal will connect via pipeline infrastructure, including links to the existing Lilly pipeline, enabling distribution of natural gas to inland markets and power plants.

More information is available on the Vopak announcement and the Zululand Energy Terminal site.

Signing Ceremony and Key Stakeholders

The June 5 agreement was signed in Pretoria in the presence of Electricity and Energy Minister Dr Kgosientsho Ramokgopa. Eskom Group Executive for Strategic Delivery Alfred Seema and ZET director Oliver Naidu represented their organizations. The event highlighted the partnership’s importance in advancing both the terminal and the associated power project.

ZET has described the deal as strengthening the commercial viability of the terminal, with Eskom’s commitment providing the anchor demand needed to progress toward final investment decisions. The framework agreement outlines collaboration on regulatory approvals, commercial contracting, project structuring, and infrastructure development.

Photo by Kelly Arnold on Unsplash

Previous Setbacks and Regulatory Path Forward

The Richards Bay gas-to-power project has faced legal hurdles. In September 2025, the Supreme Court of Appeal set aside Eskom’s environmental authorisation after finding that public consultation processes were inadequate. The ruling required Eskom to restart the approval process with proper community engagement.

Despite this, the Heads of Agreement signals continued momentum. Project timelines have been adjusted, with operations now targeted around 2028. The terminal itself has seen its final investment decision pushed back in some reports, reflecting the need for firm customer commitments and regulatory clarity.

Further details appear in reporting from Reuters and Engineering News.

Economic and Energy Security Implications

Securing LNG supply through this partnership supports Eskom’s broader strategy to diversify its generation portfolio. Natural gas offers advantages in flexibility compared to coal, with lower emissions intensity and faster ramp-up capabilities. This can help mitigate risks associated with coal plant retirements and supply disruptions.

For the regional economy in KwaZulu-Natal, the project promises job creation during construction and operation phases, as well as opportunities in the supply chain for logistics, engineering, and maintenance services. Richards Bay’s status as an industrial hub positions it to benefit from increased energy infrastructure investment.

At the national level, the deal contributes to efforts to address potential gas supply shortfalls projected in coming years and supports the development of a domestic LNG import market.

Environmental Considerations and Stakeholder Perspectives

While gas is positioned as a transition fuel, the project has drawn attention from environmental groups concerned about emissions, marine impacts at the port, and the need for robust public participation. The court ruling underscored the importance of meaningful consultation with affected communities.

Proponents highlight that modern combined-cycle plants are more efficient and produce fewer pollutants than older coal facilities. The integration with renewables is expected to optimize the overall system, reducing the need for diesel peakers during high-demand periods.

Minister Ramokgopa and project partners have stressed the role of gas in ensuring reliable power supply while South Africa scales up wind, solar, and battery storage capacity.

Challenges, Risks, and Mitigation Strategies

Several risks remain. LNG prices are subject to global market volatility, which could affect long-term power costs. Currency fluctuations are also a factor, as imports are typically priced in US dollars. Infrastructure development, including pipeline connections and grid upgrades, requires coordinated investment and timelines.

Regulatory delays, further legal challenges, or changes in policy could impact progress. Eskom and ZET are addressing these through the framework agreement’s focus on joint regulatory navigation and phased development.

Industry observers note that successful execution will depend on transparent procurement, competitive LNG sourcing, and alignment with the Integrated Resource Plan and other national energy strategies.

Future Outlook and Timeline

With the Heads of Agreement in place, attention now turns to detailed commercial contracts, environmental impact assessments, and financing arrangements. A final investment decision for the terminal is anticipated in the coming years, contingent on securing additional offtake agreements.

The power plant project will require renewed environmental authorisation following the 2025 court decision. Construction timelines point toward commercial operation in the late 2020s, aligning with broader goals of grid stability and energy diversification.

Longer term, the Richards Bay development could serve as a model for additional gas infrastructure along South Africa’s coastline, including potential projects in other ports.

Photo by Jacques Nel on Unsplash

Broader Impact on South Africa’s Energy Transition

This agreement reflects a pragmatic approach to energy planning, recognizing that a mix of technologies will be needed in the coming decades. Gas-fired generation can provide the flexibility required to integrate higher shares of variable renewables while coal plants are phased down responsibly.

By anchoring demand at the Zululand terminal, Eskom’s commitment helps de-risk the overall LNG import project, potentially attracting further investment from international suppliers and financiers. The partnership also underscores the importance of public-private collaboration in delivering critical infrastructure.

As South Africa continues its energy journey, projects like Richards Bay highlight both the opportunities and complexities of modernizing the power sector.