American oil giant joins South Africa’s first LNG import hub as coal-dependent economy races to secure future power supplies

• An American oil major has signed a preliminary agreement to supply LNG to South Africa’s proposed Zululand Energy Terminal.
• The project is expected to become the country’s first LNG import facility and support Eskom’s planned 3,000MW gas-fired power plant.
• The deal comes as South Africa seeks to reduce its dependence on coal while avoiding future electricity shortages.
• It also strengthens Richards Bay’s position as a potential gateway for a new gas market in Southern Africa.

ExxonMobil has entered into an initial agreement with the Zululand Energy Terminal (ZET), a proposed LNG import facility at Richards Bay on South Africa’s east coast that is expected to play a central role in the country’s evolving energy mix.

The agreement follows a separate deal signed earlier this month between state-owned utility Eskom and ZET to support a planned 3,000-megawatt gas-to-power project in Richards Bay, one of the largest gas-fired power initiatives under consideration in South Africa.

Taken together, the two agreements suggest that South Africa’s long-delayed LNG ambitions are beginning to move beyond planning and towards execution.

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The country has spent years trying to balance two competing priorities: reducing its dependence on coal while ensuring it does not return to the severe electricity shortages that once crippled businesses, factories and households.

Coal still supplies around 80% of South Africa’s electricity, making it one of the world’s most coal-reliant major economies.

Yet policymakers increasingly acknowledge that renewable energy alone cannot immediately replace ageing coal-fired stations that continue to provide the bulk of the country’s power. That has elevated the role of natural gas in South Africa’s energy planning.

Eskom has repeatedly described gas as a transition fuel that can provide dependable electricity when solar and wind generation are unavailable.

The utility sees gas-fired generation as an important complement to renewable energy as the country works to modernise its power system.

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For ExxonMobil, the agreement strengthens its presence in a market it has identified as strategically important.

The company has previously described South Africa as a priority LNG destination and is pursuing a broader strategy to expand its global LNG business to more than 40 million metric tonnes annually by 2030. South Africa’s growing demand for gas infrastructure aligns with those ambitions.

The Zululand Energy Terminal is expected to be developed in phases- its initial phase will include floating storage and regasification infrastructure capable of handling around 3 million metric tonnes of LNG annually.

A second expansion phase could increase capacity to 4.5 million tonnes per year and bring total project investment to roughly $1 billion.

The facility is being developed to provide open-access LNG import, storage and regasification infrastructure, creating a foundation for a broader gas market beyond Eskom’s power needs.

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Project developers have said the terminal is intended to improve energy security while supporting South Africa’s longer-term decarbonisation efforts.

Its location at Richards Bay is also strategically significant as the port is already one of South Africa’s most important industrial gateways and could emerge as a major entry point for LNG into Southern Africa if the project proceeds as planned.

Zululand Energy Terminal director Oliver Naidu has said ExxonMobil’s involvement strengthens plans to create a competitive and sustainable gas market centred on Richards Bay.

The project has faced delays in the past, including uncertainty linked to Eskom’s gas-to-power programme and legal challenges surrounding related infrastructure development. Those hurdles pushed back investment decisions on parts of the LNG project.

Even so, the latest agreements suggest momentum is building behind a project that could reshape how South Africa powers its economy.