IN SHORT: Eskom and Zululand Energy Terminal signed a heads of agreement on June 5 establishing the framework for a long-term strategic partnership that will supply liquefied natural gas to Eskom’s planned 3,000MW gas-to-power project at Richards Bay over a 25-year lifecycle. Eskom will assume foundation customer status at the terminal, securing open access to LNG import, storage and regasification infrastructure at Richards Bay port. The Zululand Energy Terminal is a joint venture between Vopak Terminal Durban, Reatile Group and Transnet Pipelines. The deal represents the first concrete supply arrangement for the gas-to-power programme under South Africa’s IRP 2025, which has designated 6,000MW of gas-fired capacity for the national energy mix by 2030.
Eskom has taken the most consequential step yet in realising South Africa’s gas-to-power ambition, signing a heads of agreement with Zululand Energy Terminal to supply the planned 3,000MW Richards Bay gas plant with LNG over a 25-year period, converting the country’s gas-to-power policy from a planning document into a commercial transaction with a specific fuel, a specific terminal and a specific counterparty. The agreement, signed June 5 and made public June 7, connects three links of the gas supply chain simultaneously: a dedicated LNG import terminal at Richards Bay, regasification infrastructure that converts liquefied gas into pipeline-ready natural gas, and a long-term power generation facility that will use that gas to deliver dispatchable electricity to the grid.
- The Zululand Energy Terminal, South Africa’s first LNG import terminal, is located at the Port of Richards Bay on the KwaZulu-Natal east coast. The terminal, awarded its Transnet National Ports Authority concession in 2024, is designed for an initial capacity of 2 million tonnes per annum with plans to scale to 5 million tonnes as industrial and power generation demand grows. The terminal operates on open-access terms, meaning Eskom’s foundation customer status does not preclude other industrial users from accessing regasification capacity on agreed commercial terms.
- Eskom Group CEO Dan Marokane described foundation customer status at the terminal as a critical enabler for the 3,000MW gas programme, framing the LNG contracting approach as designed to minimise fuel price volatility while supporting grid system reliability aligned with IRP 2025 objectives. The long-term contracting structure is essential for project finance: a 25-year gas supply agreement is the type of off-take contract that enables external investors and lenders to advance the capital required for the power plant itself.
- The Richards Bay 3,000MW gas project is to be developed through a private sector participation model involving external investors, project finance and long-term contracts for both electricity sales and LNG supply. The heads of agreement is the fuel supply dimension of that structure. The power purchase agreement with Eskom as buyer completes the commercial framework. Both contracts are needed before international project finance lenders will advance the debt capital for the $3 to $4 billion gas plant construction.
- A court order stalled the 3,000MW project in early 2026 over inadequate public consultation procedures. The gas plant remains under legal challenge while Eskom works through the regulatory requirements to satisfy the court. The HOA with Zululand Energy Terminal proceeds in parallel with the legal process because fuel supply contracting can be advanced independently of power plant construction approvals. When the legal challenges are resolved, Eskom will have a ready fuel supply framework rather than needing to restart commercial negotiations.
- South Africa has committed to 6,000MW of gas-fired capacity in the IRP 2025, framing gas as a bridge fuel that provides dispatchable generation to balance intermittent renewables on the grid. The Integrated Resource Plan’s gas allocation is the policy foundation for both the Richards Bay project and the broader LNG import infrastructure. Without committed gas capacity in the IRP, the commercial case for a permanent LNG import terminal would be weaker. The IRP gives the Zululand terminal its long-term demand anchor.
- The Mozambique dimension strengthens the strategic logic. Mozambique’s Rovuma LNG, assessed by Standard Bank in a June 9 study as having the potential to make Mozambique the world’s fourth-largest LNG supplier, is geographically proximate to Richards Bay. Pipeline and LNG supply arrangements from Mozambique to South African consumers are a natural commercial combination once both the Mozambique production facilities and the South African import infrastructure are operational. The Eskom-Zululand HOA is the demand signal that makes Mozambique-to-South Africa gas deals commercially negotiable.
The Eskom LNG deal is significant beyond Eskom’s own balance sheet. It demonstrates that South Africa’s energy transition from coal to renewables-plus-gas is moving from policy to contract, from planning to execution. For years, South Africa’s gas-to-power ambitions were stalled by the absence of committed LNG import infrastructure and the circular problem that no one would invest in import terminals without committed off-takers and no one would commit to off-take without assured import infrastructure. The Eskom-Zululand HOA breaks that circular dependency by establishing Eskom as the foundation customer that gives the terminal’s commercial viability its grounding.
The Bigger Picture: South Africa needs gas for three reasons that are all structural. First, gas provides the dispatchable generation that solar and wind cannot: the ability to ramp up power output in hours, not days, when clouds cover the sun or winds drop. Second, gas turbines can be built faster than nuclear or coal, addressing South Africa’s near-term capacity gap. Third, gas-to-power attracts the private sector capital that Eskom’s balance sheet cannot deploy at the scale the grid requires. The Zululand Energy Terminal and the Richards Bay 3,000MW project are the concrete expression of all three rationales. The legal challenges and the Mozambique supply uncertainties are real risks. But the direction is clear, the commercial structures are forming, and South Africa’s gas future is no longer a planning document. It is a signed heads of agreement at Richards Bay.
Source: CNBC Africa, June 5 2026 / Eskom, June 5 2026
