Sunbird Energy has agreed to supply gas to South Africa's power company Eskom, the Australian-listed firm said on Wednesday, in line with the utility's plan to use gas to run its generators rather than costly diesel.
State-owned Eskom, which supplies about 95 per cent of electricity to Africa's most advanced economy, is battling to meet electricity demand and has to rely heavily on diesel-powered turbines to keep the lights on.
Sunbird said in a statement its Ibhubesi Gas Project (IGP) in South Africa would supply Eskom's Ankerlig power station with 30 billion cubic feet of gas a year for up to 15 years.
Ankerlig has an installed capacity of 1,350 megawatts and has used diesel since it was constructed in 2007.
IGP, a joint venture between Sunbird, a south African-focused gas explorer and South Africa's national oil company, PetroSA, is South Africa's largest undeveloped gas field.
"The supply of Ibhubesi gas to Ankerlig will allow Eskom to realise significant fuel cost savings," said Sunbird.
The firm, which owns 76 per cent of the IGP, said the deal will encourage further exploration and development of gas in the offshore Orange Basin, located 280km (168 miles) from Cape Town.
In February, President Jacob Zuma directed Eskom to switch to gas to cut down on the spiralling costs of using diesel.