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Market Chatter: Exxon Mobil Enters Preliminary LNG Supply Deal With South Africa, Sources say

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Exxon Mobil (XOM) has entered into a preliminary agreement to supply liquefied natural gas to South Africa, as the country adds generation capacity to tackle electricity outages, Bloomberg reported on Tuesday, citing sources with knowledge of the deal.

The LNG supply will be used by state-owned utility Eskom Holdings to import gas at a proposed LNG terminal, Zululand, located in the industrial city of Richards Bay on the east coast, the sources told the news agency.

The gas will be burned at a 3 gigawatt power plant that has not yet been built, the article said.

Exxon and Eskom declined Bloomberg's requests for comment.has reached out to the companies seeking comment.

The deal not only boosts energy supplies to increase power generation but will simultaneously further the country's transition away from coal, which is still used to produce 80% of the country's electricity, the article said, though gas will be more expensive than coal.

Through the deal, Exxon also takes another step towards its goal of doubling LNG supply to above 40 million tons a year by 2030, Bloomberg said

The oil major recently started operations at its Golden Pass export terminal on the US Gulf Coast and will consider later this year whether to build such facilities in Mozambique and Papua New Guinea.

Eskom in turn has said the gas supply will be a bridge fuel that will facilitate the addition of renewables to the grid, providing baseload power to smooth out peaks and troughs in wind and solar output.

With little domestic production and a long wait for the delivery of wind turbines, the country will likely have to slow down plans to close about 20% of its coal-fired power stations by 2030, the article said.

(Market Chatter news is derived from conversations with market professionals globally. This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed.)

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