Fossil gas is currently having a bit of a moment. While rich countries like the USA expand domestic gas production to record highs, major infrastructure projects are also revving up to produce vast quantities of gas in emerging markets. With media attention recently focussed on UK Prime Minister Andy Burnham’s controversial approval of production at Jackdaw, a North Sea gas field, it is easy to forget the economically dubious plans in place for massive gas infrastructure expansion across the Global South.
A recent report by campaign group Recourse, which Fieldwork contributed to, critically examined major fossil gas projects in Bangladesh, Pakistan, Nigeria, Namibia and South Africa. These projects, typically framed as important development initiatives, will supposedly boost exports, support nascent industrial sectors and improve the national balance of payments.
Our joint report argued these new gas projects are a gamble. All too often, gas is touted as a ‘bridge fuel’: a fossil industry marketing trick that ignores how gas increases the likelihood of macroeconomic instability, unaffordable debts, foreign exchange risk and stranded assets. Our case studies illustrate these dynamics in two emerging African energy hubs: South Africa, a gas importer, and Namibia, a potential producer.
Debt traps, stranded assets and FX risk
It’s worth reflecting on the financial implications of gas infrastructure buildout. Although energy policymakers often view gas favourably as a ‘dispatchable’ cleaner fuel that supplements the intermittency of renewables and reduces carbon emissions relative to coal, gas remains a planet-heating fossil fuel.
Beyond such obvious climate concerns are economic ones: governments lacking gas reserves must first construct import infrastructure, which is often expensive, debt-funded and fraught with risk. LNG export terminals cost in the range of $5-10bn, while regasification terminals used for importing LNG can cost anywhere between $250m and $10bn depending on their size. What’s more, many of the component parts and technical experts needed to build these facilities are imported, doing little to boost domestic industrialisation.
Since 2021, the monthly price of gas has moved twice as quickly as the 1992-2021 average
Cost recovery, meanwhile, takes place over decades, raising the risk of non-payment as renewables – already far cheaper than gas – are added to the grid or directly at their point of use. Gas also exposes importing countries to increasingly volatile prices (Figure 1) and foreign exchange risk, just as households around the world are re-discovering today. Since 2021, the price of gas in Asian markets has ranged from $8.80 to $54.20 per MMBTu, a sixfold spread, with a typical month moving more than twice as much as the 1992-2021 average (authors’ calculations).
South Africa wants to import gas. Bad idea
Consider South Africa, which plans to shift from a largely coal-based electricity generation mix to one based on renewables and importing fossil gas.
Chronic issues at the state electric utility, Eskom, plus an eye-watering 78.9% national debt-to-GDP ratio in 2025, mean that South Africa must rely largely on private procurement to fund gas import infrastructure. According to the government’s Integrated Resource Plan 2025, this capacity will amount to 6 GW of new gas-to-power generation by 2030 and a further 12.3 GW of new gas power between 2031 and 2042.
Yet South Africa is running out of imported gas and expects a shortfall by 2030 as production in Mozambique’s Pande-Temane field declines. The plan is to replace these by building an LNG terminal at Richards Bay in KwaZulu-Natal, on South Africa’s south-east coast.
ExxonMobil’s preliminary signing on 17 June this year of an LNG supply deal with Zululand Energy Termina (ZET), the terminal’s operators, is a boost for the government after years of uncertainty as to whether the deal would close. Exxon’s deal is underpinned by South African state utility Eskom’s signing of a long-term agreement with ZET earlier in the same month to secure gas for a planned 3-GW gas plant at Richards Bay.
While the specific terms of Exxon’s supply deal are yet to be finalised, let alone made public, it is South Africa’s consumers and businesses that will ultimately be exposed to the fluctuations in world gas prices. Of course, no government can reasonably be blamed for failing to anticipate the crisis in the Strait of Hormuz inaugurated by US President Donald Trump’s declaration of war on Iran.
Yet a gas-based future heightens the risk of a future fiscal crisis. Although renewables are front and centre of the South African government’s 2025 Integrated Resource Plan, gas is still set to play a major role until the 2040s, locking in exposure to spikes in global prices.
Gas makes even less sense when we consider that gas-powered power plants are no longer cost-competitive with large-scale solar plus storage. This cost disparity is accentuated by another, external incentive: South African companies are increasingly switching away from carbon-intensive power to avoid being hit by the EU’s Carbon Border Adjustment Mechanism, which amounts to a carbon-based tariff on South Africa exports. Even though gas power has lower emissions than coal, renewably-generated electricity remains cheaper than gas, raising the prospect of the gas infrastructure risks being obsolete before it is even installed.
Importing gas also adds currency and tariff risks that Eskom can ill afford. Were the rand to depreciate in future, the real cost of imported LNG to Eskom would increase, adding more debt to its books before future tariff increases are approved by the energy regulator. Recent tariff increases by the financially troubled Eskom have contributed to an affordability crisis among Eskom’s ratepayers, and experience elsewhere suggests that gas increases tariff costs when added to the grid.
Namibia wants to extract gas. Again, bad idea
A country with no history of hydrocarbon production, Namibia is keen to begin oil and gas extraction in its Orange Basin. Financed by oil companies and the new Africa Energy Bank, Namibia claims at least 2.2 trillion cubic feet of proven gas reserves, with recent estimates suggesting double that in Venus, one of the Orange Basin’s biggest projects.
Superficially, it make sense for Namibia to exploit its fossil gas reserves. Carried interest from licenses and revenue royalties would generate much-needed income for the state’s coffers. Like South Africa, Namibia currently bears high levels of external debt-to-GDP, valued at 65.1% as of June 2026, and badly needs foreign currency for its imports. As such, it must rely on partnerships with international oil companies such as TotalEnergies and QatarEnergy, ceding much potential revenue in the process.
Namibia has no refining capacity, no gas distribution network, no regasification capacity and no gas-fired power plants. So the gas would be, at least in the short term, exclusively for export, with revenues invested in the economy. Were such infrastructure to be built, it would carry the same risk as in South Africa: as utility-scale solar and wind increasingly outcompete gas-based electricity, the risk of stranded assets becomes more material, particularly in countries with high breakeven extraction costs like Namibia.
More importantly, international gas markets are inherently volatile and are not guaranteed to deliver the revenues desired by the Namibian government. Through the national oil company, NAMCOR, Namibia is set to earn 10% carried interest on the licenses, but the IMF has warned of the need to avoid public revenues being spent on unanticipated ‘cash calls’ for exploration and development, and to avoid participating oil companies benefitting from excessive tax deductions.
Finally, one must acknowledge the environmental risks inherent to any new hydrocarbon extraction. Namibia’s offshore waters boast a uniquely productive ecosystem, sustained by the cold, nutrient-rich Benguela current meeting warmer Agulhas waters. This ecosystem, which supports seven native seabird species, would be severely at risk from any oil spills from the Venus project, according to an impact assessment carried out by SLR, an environmental consultancy acting for TotalEnergies.
Gas is bad economics
South Africa and Namibia illustrate an uncomfortable reality. During the so-called energy transition, countries face a tradeoff between decarbonisation, industrialisation, export revenues and exposure to volatile global energy markets. Gas might offer a tempting solution to the first three, but only by relying on the third.
Building large-scale gas infrastructure is not the solution to South Africa or Namibia’s energy challenges. For South Africa, the real answer must be even more ambitious energy storage and demand side response. The government should raise its ambition beyond the 8.5 GW additional battery storage it already plans to deliver by 2039. For Namibia, if it is to export gas, the country must be prepared to invest revenues in a sovereign wealth fund and manage the economic volatility associated with massive influxes of capital in new fossil fuel economies.
Make no mistake: whether for importing or exporting countries, in the North or in the South, fossil gas is bad economics. It is time to abandon the ‘bridge fuel’ myth and rely on solar, wind and battery storage.