The agreement represents a major milestone for South Africa's efforts to diversify its energy mix and reduce its long-standing dependence on coal-fired power generation, which currently accounts for the majority of the nation's electricity production.
The deal follows months of discussions between the two parties. Earlier this year, Reuters reported that ZET was seeking to secure a long-term LNG supply arrangement with Exxon Mobil as it advanced plans for the strategic energy project.
Located at Richards Bay on South Africa's east coast, the Zululand Energy Terminal is expected to play a central role in developing the country's natural gas infrastructure and establishing a reliable gateway for imported LNG.
According to ZET Director Oliver Naidu, Exxon Mobil's involvement strengthens confidence in the project and reinforces the strategic importance of Richards Bay as a future energy hub.
"Exxon Mobil's participation helps reinforce the importance of Richards Bay port as an entry point for LNG and supports plans to unlock a competitive and sustainable gas market," Naidu said.
The partnership aligns with Exxon Mobil's broader ambitions to expand its footprint in emerging LNG markets. The energy giant has identified South Africa as a priority growth destination as it seeks to increase its global LNG supply capacity to more than 40 million metric tonnes per annum (mtpa) by 2030.
Company executives say the agreement reflects Exxon Mobil's commitment to supporting South Africa's energy transition while ensuring dependable fuel supplies for power generation and industrial development.
"This agreement reflects Exxon Mobil's global LNG experience and our commitment to support South Africa's energy security with reliable supply," said Andrew Barry, chairman of ExxonMobil LNG Market Development Inc.
The preliminary supply deal comes shortly after another important development for the terminal project. Earlier this month, South African state-owned utility Eskom signed a long-term LNG agreement with ZET that will underpin a planned 3,000-megawatt gas-to-power project, highlighting growing demand for natural gas as the country seeks alternatives to aging coal infrastructure.
The Zululand Energy Terminal will be developed in phases. The first stage will include a floating storage unit alongside an onshore regasification facility capable of handling approximately 3 million metric tonnes of LNG annually. This translates to around 400 million standard cubic feet of natural gas per day, providing substantial capacity to support power generation and industrial users.
A second expansion phase is also planned, significantly increasing the scale of the project. Once completed, the total investment is expected to reach approximately $1 billion.
Naidu said Phase 2 will add further onshore storage and regasification infrastructure, increasing the terminal's annual throughput capacity to 4.5 million metric tonnes and boosting daily gas volumes to roughly 600 million standard cubic feet.
The project is widely viewed as a key component of South Africa's long-term energy strategy. As the country grapples with electricity shortages, ageing coal plants and the need to reduce carbon emissions, natural gas is increasingly being positioned as a transitional fuel capable of supporting energy security while enabling a gradual shift toward cleaner energy sources.
If completed as planned, the Zululand Energy Terminal could become a cornerstone of South Africa's gas economy, attracting investment, supporting industrial growth and helping to meet rising energy demand as the country advances its transition toward a more diversified and resilient power sector.