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Vast majority of SA’s offshore oil and gas blocks already under licence, application

Interest in oil and gas exploration off South Africa’s coast has, in the past four years, accelerated to such an extent that nearly all the country’s offshore exploration blocks are under licence or under application for exploration by independent companies, Petroleum Agency SA geologist Jonathan Salomo told delegates at the Gas Africa conference.

“There has been a dramatic change in the last few years, which has been driven by new legislation, neighbouring offshore finds and a sustained high oil price. This has been further bolstered by Petroleum Agency SA’s own efforts to attract explorers,” he said.

Producers were also looking for supply alternatives to the oil-rich, but politically unstable, Middle East oilfields and have been further attracted by recent legislation in terms of the Mineral and Petroleum Resources Development Act, which Salomo argued had provided a degree of risk-share with the South African government.

Offshore exploration activity over the past two years had produced some 21 000 km2 of three-dimensional survey data and over 36 200 km2 of two-dimensional data.

While emphasising that an accurate quantification of South Africa’s offshore oil and gas potential remained elusive, at present, Salomo maintained that, based on geological modelling and long-term predictions, Petroleum Agency SA, which promotes exploration for onshore and offshore oil and gas resources, had estimated prospective offshore oil and gas resources at 21.75-billion barrels and 62.4-trillion cubic feet respectively.

Of this, 10.2-billion barrels of oil and 27.7-trillion cubic feet of gas was attributed to prospective resources along the West Coast of South Africa, while 9.55-billion barrels of oil and 25.5-trillion cubic feet of gas was estimated for blocks off the country’s South Coast.

“Prospective resources along the East Coast of the country are estimated at two-billion barrels of oil and nine-trillion cubic feet of gas. I must, however, emphasise that these figures are not yet proven,” he outlined.

Among the largest offshore oil and gas projects currently under way was the Ibhubesi gas project off the West Coast – a joint venture between South African national oil company PetroSA and Australian independent energy group Sunbird Energy.

This project would see the development of a 400-km-long gas pipeline, two shorecrossing sites – one between Grotto Bay and Duynefontein and the other on the Saldanha Peninsula – and the construction of an onshore gas-receiving facility near Ankerlig, in the Western Cape.

“The offshore field is expected to begin production in late-2017, early 2018, with an initial flow rate of 100-million standard cubic feet of gas a day,” Salomo said.

Along the South Coast, several global energy groups were embarking on shallow and deep-water exploration, while interest in the blocks along South Africa’s East Coast had largely been driven by recent discoveries in nearby Mozambique and elsewhere in East Africa.

Energy giants ExxonMobil and Total, besides others, had secured exploration licences along this coastline.

ONSHORE INTEREST

Salomo added that interest in onshore oil and gas exploration drilling had also increased in recent years, driven by reports of a massive shale gas deposit in the Karoo basin.

“There is a high level of interest in onshore activity, despite carbon exploration still being in its infancy. While the Karoo basin was explored for oil in the 1960s and 1970s, new interest in the region has been driven by interest in coalbed methane, shale gas and biogenic gas,” he commented.

Noting that Petroleum Agency SA believed the shale gas deposit to be “significant”, Salomo said the group estimated the recoverable resource of this deposit at 40-trillion cubic feet.

Coalbed methane exploration, meanwhile, was largely focused in the Lephalale and Mopane sub-basins, in the north of the country, and was estimated by the agency to offer prospective resources of 17.9-trillion cubic feet.

NATALIE GREVE

ENGINEERING NEWS

27 AUGUST 2014

 

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PetroSA rethinks Mossel Bay gas terminal

Plans to establish a floating liquefied natural gas (FLNG) import terminal in Mossel Bay will no longer be pursued, PetroSA said on Tuesday.

The decision was made by the Petroleum Oil and Gas Corporation of SA (PetroSA) and the country’s National Oil Company (NOC), it said in a statement.

The location was found to be technically and commercially problematic, according to a feasibility study.

The study found meteorological and oceanographic conditions in Mossel Bay were severe and increased the logistical and gas supply costs of the project.

PetroSA said it had been investigating the possibility of importing LNG to supplement dwindling gas reserves in Mossel Bay since 2008.

It proposed the importation of LNG into Mossel Bay through a terminal which would float on the ocean.

Natural gas, found underground, is liquefied through a cooling process which makes it easier to store and transport.

The gas is cooled to about -160 Celsius, which shrinks its volume up to 600 times. The liquid is stored and transported by ship to various terminals where it is returned to a gas at a regasification facility and piped to consumers.

PetroSA Group CEO Nosizwe Nokwe-Macamo said the company would explore other location options.

“The good thing about this exercise is that the results of these feasibility studies will be put to good use in other projects in the medium to long-term.”

She said PetroSA had studied the 13 operational FLNG terminals in countries, including Argentina, Brazil, and the United Kingdom.

“The main distinguishing factor between these FLNG terminals and the one that was proposed for Mossel Bay is the fact that all of them are located either in very well-protected ports, very near the shore, or are located on very calm rivers,” she said.

SAPA

28 August 2014

 

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Government ready to move forward with fracking

Government says it is ready to regulate and monitor companies that have expressed an interest in exploring shale gas in the country.

Thibedi Ramontja, the Director-General of the Mineral Resources Department, said the draft regulations will, once finalised, be effective to deal with the risks that exploration might pose to the environment.

Ramontja was briefing the Portfolio Committee on Mineral Resources on its progress in finalising the regulations for petroleum resource development.

“The draft regulations, once finalised, will result in a regulatory framework that ensures safe extraction of gas, which will contribute to diversification of South Africa’s energy mix, energy security supply, significantly boost South Africa’s economy and have positive effects on the Gross Domestic Product,” he said.

The department first halted new applications for exploration rights in 2011 to investigate the impact that the process would have on the environment, and an interdepartmental task team was set up to head this process.

The investigation also looked at ensuring that fracking would not affect astronomy research projects linked to the Square Kilometre Array (SKA) project in the Karoo. After the investigation, the draft regulations for petroleum exploration and exploitation were published for public comment in October last year.

Ramontja said government would consult interested and affected stakeholders next month, before finalising the regulations to allow exploration to begin.

He said while it was too soon to estimate the gas reserves, economic contribution and how many jobs the projects would create, he said companies – local and international – would not have shown interest if they did not anticipate to make profits.

Ramontja added that shale gas will not only create a new industry, but also present South African higher education institutions with research opportunities that are expected to produce Masters Degrees and PhDs.

SANews

27 August 2014

 

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CNG could keep Mossel Bay GTL plant alive

PetroSA is understood to be considering importing CNG to keep its 45,000 barrel per day Mossel Bay GTL refinery operational, although it has abandoned plans to import LNG.

While PetroSA has not publically announced the CNG plans, Interfax understands that in April the company sent out a request for advice pertaining to a project to import 80 PJ (2.1 billion cubic metres) of CNG per year from Sasol’s gas fields in southern Mozambique.

The basic outline of the project is to pipe gas from Sasol’s central processing facility near Inhassaro in Mozambique 200 km south via an onshore pipeline, to an offshore loading bay facility in Inhambane. The CNG would then be shipped approximately 1,850 km to a receiving terminal at Mossel Bay and piped 20 km to the Sasol’s GTL facility.

Interfax understands PetroSA has already signed a memorandum of understanding (MOU) with Sasol Petroleum International to negotiate a sales and purchase agreement for gas from the project from Sasol’s Pande and Temane fields in southern Mozambique. Sasol could not confirm an MOU had been signed at the time of going to press.

Sasol already supplies gas to its South African network from Pande and Temane via an 865 km pipeline.

PetroSA announced on Tuesday it would no longer pursue a project to import LNG via an FSRU at Mossel Bay because the location was too technically and commercially challenging. A feasibility study conducted by WorleyParsons “found meteorological and oceanographic conditions in Mossel Bay are severe and would inevitably increase the logistical and overall gas supply costs of the project”, the national oil company said in a press release.

The challenging location would not necessarily hinder CNG imports, however, which require “minimal facilities with a significantly smaller footprint compared with LNG”, said Lyndon Ward, marketing director for Calgary-based maritime CNG specialists Sea NG.

The volumes and relatively short distances involved in importing gas from Mozambique into Mossel Bay also favour CNG. “CNG systems are typically

less costly than LNG when the transport distance is less than 2,000 km and the volume is below 14 million cubic metres per day,” Ward added.

While costs vary from project to project, estimates for the transportation tariff to import around 2.1 bcm of gas over 1,500 km would be around $4-5/MMBtu – plus gas supply costs – based on a 15-year term, according to Sea NG calculations.

Three-year countdown

PetroSA’s GTL plant is already running at 50% of its capacity because of dwindling feedstock. Gas supplies from PetroSA’s FA-EM and South Coast gas fields, as well as the Oribi and Oryx oilfields in Block 9, are expected to dry up completely within the next two-to-three years.

A maritime CNG import project – which could theoretically be online 26-30 months after an FID – could just about meet PetroSA’s feedstock deadline.

However, for now PetroSA is focusing on bringing new domestic gas fields online. The company started drilling at its F-O field, 40 km southeast of its FA production platform off South Africa’s southern coast, in January 2013. Gas from the first of the five wells in the programme is expected before the end of 2014, a spokesperson told Interfax. Drilling is scheduled for completion in mid-2015.

French oil major Total also started exploratory drilling in South Africa’s deep offshore this summer. Gas from Block 11B/12B, around 175 km from Mossel Bay, could also be used to supply the GTL facility. However, exploration is still in the very early stages.

SouthCapenet

28 August 2014

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2014 Budget Vote speech by the Deputy Minister of Energy, Ms Thembisile Majola

Deputy Minister of Energy, Thembisile Majola

LADIES AND GENTLEMEN

I would like to add my voice in thanking the millions of our people who have once again placed their faith and confidence in the African National Congress. We are humbled and will not betray that trust.

The ANC government has correctly identified energy as an apex priority for the attainment of economic growth in the fight against the triple challenges of unemployment, poverty and inequality. It is with the overwhelming mandate that you have given us, that we are here today to outline how we plan to tackle the scourge of jobless growth in a very challenging global economic environment.

We do this as part of a larger collective of government across its three spheres. We are cognisant of the fact that we cannot do this alone and will work together hand in glove with our people and organised formations of business and civil society.

The National Development Plan (NDP) has outlined the need for an energy sector that promotes economic growth and development, promotes social equity through expanded access to energy services and environmental sustainability through concerted efforts to reduce pollution and mitigation of the effects of global climate changes. The ANC Manifesto identified the access to reliable energy supply in all its forms, as a priority for this administration.

Honourable members,

The Head of State, President Zuma’s 2014 State of the National Address has put energy at the centre of economic development for the country. The right combination of policies and technologies is strategically important to ensure that the links between economic growth, the increasing energy demand and the associated energy related carbon dioxide emissions is managed as we increase our energy generation capacity. It is thus important that our energy policies address issues of energy access, sustainability, affordability and appropriate quality of service for the end user. I will expand on this matter a little later in my speech.

The Department of Energy and the State Owned Companies for which it is responsible, have a mandate, collectively, to ensure that security of energy is not only about the provision of electricity, liquid fuels and gas. Security of energy is also about their sustainable utilisation, affordability and accessibility for our people, business and industry. It is with this very clear understanding and appreciation of its urgency that the energy plans we are developing for the short, medium and long term need to be supported by effective policies, strong institutions and human resources, effective governance, as well as a regulatory framework that addresses the critical needs for skilling and skills transfer, youth unemployment and localisation of energy inputs so as to grow our local industries.

We have been elected on a mandate that prioritised energy security and our responsibility as the executive is to ensure that the policy trajectory is in keeping with an optimum and efficient energy mix. The roll out of the renewable energy programme has been applauded in a number of

quarters however there seems to be reluctance to embrace the totality of this energy mix that our people have called for. Coal will continue to be a major source of energy both for liquid fuels and electricity. We are a country blessed with abundant coal reserves. It is imperative that we provide leadership in the cleaning of our coal for energy production. This is a resource we can ill-afford not to exploit.

As part of the energy mix we remain resolute in our belief that the potential for shale gas in the Karoo basin needs to be exploited. This resource has the potential to create a new industry and associated skills. The need to ensure that this is exploited with great care to the environment cannot be over-emphasised. The use of imported gas will continue and efforts to explore for more gas off shore will also be accelerated. We are aware of a major international oil company whose drilling rig is about to move into place in the Southern Cape beginning what we believe will be an exciting phase for South Africa.

Honourable Speaker

The infrastructure for liquid fuels has served this country for a number of decades. In addition to the 20 year liquid fuels plan, the department will conduct a vulnerability assessment of existing fuel import, manufacturing and distribution infrastructure. This will be done to test the resilience and its ability to respond to various events. The liquid fuels sector has witnessed some changes in the past decade, however we believe that it offers the greatest opportunity for radical economic transformation. In this regard the department will work very close with the Trade and Industry department to identify an approach that can accelerate transformation in this sector. Honourable Speaker,

State owned entities are a critical component in the implementation of our energy policies. It is with this in mind that we have begun a process of ensuring that we work very closely with our state-owned enterprise (SOEs) so as to ensure that we provide policy guidance and support, where required. Strong, focused and well governed entities are required for meeting the challenges of energy security for South Africa. The department is currently engaged in discussions and providing support to the Central Energy Fund (CEF) Group that will finalise the on-going restructuring process this year. In the State of the Nation Address the President had identified CEF as one of the institutions that will require restructuring to align with the need to respond to challenges and opportunities in the energy sector.

We are acutely aware of the urgency to expedite the finalisation of the Integrated Energy Plan (IEP), the updated Integrated Resource Plan (IRP).These policy development processes are urgent and necessary for the industry. We ask that you bear with us as we strive to ensure that these policies serve both the purpose of providing policy certainty, as well as ensuring energy security, support development of local industries, job creation and skills transfer.

Allow me Honourable Speaker to reiterate the democratic government’s commitment to give concerted attention to energy efficiency. There is a role for each and every one of us. We all need to know how much energy we consume in households, in our small enterprises and indeed by each of the major industrial users. Once we know, we are in a better position to identify where we can make reductions. The energy consumption I am referring to includes electricity, liquid fuels, natural and petroleum gas. Inefficient appliances need to be discarded. When purchasing vehicles, fuel efficiency must be a key consideration. The department and the National Energy Efficiency Agency within South African National Energy Development Institute (SANEDI), working with amongst others the National Business Initiative will ensure that energy efficiency programmes touch every facet of our lives. These programmes will include the implementation of the Smart Grids and the Energy Efficiency Tax incentive Schemes.

As already alluded to by the Minister, nuclear energy plays an important role in the energy security of our country. Going forward, the Nuclear Energy Company of SA (Necsa) will play a pivotal role in the localisation of our nuclear build programme which is in line with our energy policy and in particular the IRP 2010. I would like to pause here so as to emphasise a point we

often forget or conveniently over look. We have been utilising nuclear to produce energy to decades, and in fact, our host city Cape Town is basically powered by nuclear energy. We have the requisite expertise and know how to ensure continued safe utilisation of nuclear for power generation. On the new nuclear build programme, the department is cognisant of the fact that providing regulatory oversight over the new nuclear build project will require a strengthened and better capacitated regulatory body. Together with the National Nuclear Regulator (NNR), the department will ensure that capacity enhancement for both human capital and facilities continue to be the strategic thrust of the regulator over the MTEF period.

Over and above this, the NNR is in discussions with various stakeholders to establish a Nuclear and Radiation Safety Centre of Expertise to create a pipeline of skills. This centre, which will be housed in one of the local universities, will involve collaboration of the NNR with its international partners, as well as local stakeholders.

The National Radioactive Waste Disposal Institute (NRWDI) was established during the 2013/14 financial year with a mandate to fulfil the institutional obligation of managing the disposal of radioactive waste on a national scale. The Board of NRWDI is currently working with the department to ensure the operationalisation of the Institute.

The National Energy Regulator of South Africa (NERSA) as the country’s energy regulator will, over the medium term, be focusing on improving oversight of the regulated industries by conducting compliance audits and inspections, issuing licenses and setting tariffs. NERSA will do the above in order to encourage investment in the sectors, encourage new entrants and improve competition. Honourable members, if we are to achieve the energy vision as contained in the National Development Plan, skills development in the energy sector is of critical importance. Given the planned energy infrastructure investments, the country will require a substantial investment in technical skills such as engineers, technicians, artisans and project/ programme managers. The department will be engaging with relevant stakeholders in both the public and private sector to address the above challenges. In the meantime the department has formed partnerships with the Energy and Water SETA as well as Chemical Industry Sector Education and Training Authority to increase the scope of energy training in order to meet the skills needs in the energy sector. The critical skills identified are catered for in the approved sector skills plans of the aforementioned SETAs. We will leverage the benefits of the massive investment in the energy sector by ensuring that our departmental programmes display a greater degree of responsiveness to needs of our people such as the empowerment of women and the youth, whether it is through the Integrated National Electrification Programme (INEP), the roll-out of the Solar Water Heating Programme, the Independent Power Producers Programme (IPP) or the transformation of the liquid fuels sector. We will continue to strengthen interventions and programmes aimed at capacity building among vulnerable sectors to enable their meaningful participation in the energy sector in support of the country’s transformation agenda.

As part of the Decade for Women as declared by the African Union, we will expand our involvement in the Southern African Development Community (SADC) region through various programmes which include a planned workshop on Clean Energy Education and Empowerment to be held next month. The objective of this workshop is to increase participation and awareness of opportunities in the clean energy sector in our continent.

Honourable Members, a month ago we lost one of our female staff members at the hands someone she trusted. The department will follow up on the criminal proceedings and give support to the grieving family. We also intend to embark on an awareness campaign for our staff to sensitise them about gender based violence and abuse. None of us can afford to turn a blind eye while the scourge of gender based violence continues to affect our society, our communities and

our homes. The socialisation of our young boys and girls is key if we are break this cycle of violence and build responsible citizens that know their rights, but also understand appreciate that these are to accompanied by responsibilities.

Honourable member the energy programmes require a capable department that is able to respond with the necessary agility. To this end we will review the structures of the department, ensure that there are the requisite skills and ability to meet the urgent demands imposed by the need for security of energy. This we will extend to the State owned entities as they are an important component for the implementation of our policies and plans. Conclusion Honourable members having been with the Energy Portfolio for a short while, I believe that as a country we have the commitment and the ability to respond to the His Excellency, President Zuma’s call for the radical transformation of the energy sector. The Department of Energy and its entities is ready to meet the challenge, and working together we can achieve more. I thank you all on behalf of Team Energy.

 

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Address by the Minister of Energy, during the delivery of the Budget Speech 2014, Parliament, Cape Town

LADIES AND GENTLEMEN

I want to greet you firstly in the name of our beloved leader, former President Nelson Mandela, whose birthday we celebrated last week. I ask that we debate this matter with the same spirit and intensity with which he fought against injustice, but also with the same degree of humility that Madiba would have shown. I am pleased to record that the Department, together with a number of private sector partners, heeded the call to “Clean up for Madiba” by visiting the Mamelodi Tateni Community Centre. Besides cleaning up and painting the facilities, the Department was able to install solar water heaters and efficient lighting in each of these venues.

Minister of Energy, Tina Joemat-Pettersson

On 17th June 2014, on the occasion of the First State of the Nation Address of our fifth democratic administration, President Jacob Zuma affirmed the imperative to address our country‟s energy challenges in order to create a favourable environment for economic growth and development.

In that address, our government made it clear that addressing our energy constraints is an apex priority, and that energy supply in various forms is a primary catalyst in our efforts to transform our economy, and our society, in an accelerated and radical manner.

To set the tone I must repeat what the President has said. He first recognised the problem, in saying: “We need to respond decisively to the country‟s energy constraints in order to create a conducive environment for growth.‟‟

He then led us towards a solution, in stating that: „‟This situation calls for a radical transformation of the energy sector, to develop a sustainable energy mix that comprises coal, solar, wind, hydro, gas and nuclear energy.‟‟

So the direction is clear: we must tackle the energy constraints, and we must do so in a way which properly balances the many alternatives that we have. My task today is to show you how we plan to do so, as the Ministry of Energy.

Honourable Members

We accept the responsibility that our people have placed on the shoulders of the African National Congress, through their vote on the 7th May 2014. Our role is to keep the lights on and the cars on the road, and we will do our best to ensure this happens. But I also want to ensure that energy is something that is understood by ordinary people, that it is accessible and affordable, and that we build a national consensus about how we are going to take our country forward. This is in part a problem for the scientists and the engineers, to produce more energy, especially clean energy. But it is also something that each one of us can help with, as we try to

use energy more efficiently. It is not just a challenge for government; it is a problem for the private sector, it is a problem for the public, and we must solve it collectively.

And that is why, I hope you have noticed, I have already advertised for nominations to an expert panel which I plan to convene. I hope all interested parties will put forward names of suitable people, with the right expertise, who can help us to bring about the radical economic transformation we desire.

Chairperson

We are committed to the countrywide roll-out of our economic and social infrastructure programme, especially in the energy sector. We see this as a major instrument to catalyse and spur positive economic growth and job creation, as well as making a positive difference in the lives of citizens, whether they live in town (“on the grid‟), or in a rural village, and get electricity from alternative, off-grid sources.

As a starting point, we have taken steps to ensuring that that there is security of coal supplies to existing and future power stations. We have also set ambitious targets to produce additional cleaner energy and ensure energy self-sufficiency in the future. We further stated that both traditional and green energy will be expanded to ensure a platform for growth and social inclusion. Ladies and gentlemen, this will include the use of nuclear power for base-load energy generation, which will be in a safe and environmentally sustainable manner.

The Manifesto of the ruling party states that additional energy will be generated through the completion of large power stations and that solar and wind power will feed into the electricity grid to increase our generation capacity and promote environmental sustainability.

We will intensify work to ensure that further hydro-electric energy will be secured domestically and regionally for our national grid.

Over the term of this government, over 1 million homes will be equipped with solar water heaters, ensuring cheaper hot water and lower energy use for more than 7 million South Africans. An additional 1.5 million households will also be connected to energy sources, either through the grid or through non-grid means.

Lastly, the pace of oil and gas exploration – including shale gas exploration – by the state and other players in the industry will be intensified as part of the country‟s effort to ensure national self-sufficiency and energy security, again, whilst actively promoting environmental sustainability.

Honourable Chairperson,

The Energy sector has been shown to be an economic game changer globally. For South Africa, energy is the catalyst to revolutionize our economy and drive economic transformation. However, the current global energy situation is faced with many uncertainties. These include the complex environmental and climate change issues, in which energy is a major player. There are also the persistent global economic challenges still faced by some of our major trade partners, as well as continuing turmoil in the Middle East and the Ukraine. All of these impact on our energy security and therefore our economy. We need to be responsive to all of these circumstances as we chart a course into the future.

These uncertainties, and how we respond to them, however remind us that as a nation, South Africa needs to engage in a national dialogue about our energy future. How do we meet the imperative of ensuring a sustained and secure supply of energy, especially cleaner energy? In taking on this debate, we will continue to build and strengthen relations within SADC, and the African Continent. We have just returned from the BRICS Summit in Brazil, where our relations with these major players were further strengthened, and we will be guided by the experience of

these major economies. Of course, we will also engage other countries, both in the north and the south, which can help us to develop a common perspective on energy.

The Department of Energy operates in this dynamic global environment, as it takes on the substantial domestic challenges. But we have a determination to deliver on the goals and objectives that we have included in our Strategic Plans, as our contribution towards the priorities and outcomes of government.

But we must recognize that existing Infrastructure constraints, some of which are the result of inadequate infrastructure development planning, make this task a difficult one. Declining budgets, rating downgrades, and the shortage of skills in the energy sector, all contribute to rising electricity costs and volatile oil prices, which contribute to the critical energy situation. These factors, many of which are out of our hands, place severe strains on the energy supply chain, and we must work together to collectively address these challenges.

Honourable Members

The Department of Energy has made a number of strides since its formal establishment in 2010, and these have contributed to the overall development agenda of government. I do not wish to repeat the “good story” that we have been writing, together with our people and social partners, but do permit me, Chairperson, to reflect briefly on some of the key areas of work undertaken during the last fiscal year.

We have introduced a revised regulatory framework for facilitating the introduction of new generation capacity through independent power producers. This culminated in reaching financial close and commencing with the construction of 1000MW of open cycle gas turbines at Avon in KwaZulu Natal and Coega in the Eastern Cape, as well as 3900MW of renewable energy plants based on solar, biomass, hydro, wind and landfill gas. It gives me pleasure to indicate that out of 28 IPPs approved during Window 1, a total of 14 generation plants have been completed, producing over 600 MW of green power into the national grid as I am speaking.

A New Household Electrification Strategy was approved by Cabinet in June 2013 to address electrification backlogs and to ensure universal access by 2025. This will be done by means of utilizing grid extension, but also by means of non-grid PV solar systems. This is in line with the proposals of the NDP for reaching universal access, however a progressive roll-out programme is being implemented through the New Household Electrification Strategy to reach the target of universal access earlier.

The electrification target for 2013/14 Financial Year was to grid electrify 260 000 households, we have achieved a total of 292 714, and in addition 14 059 non-grid connections were also completed. During the past financial year therefore a total of 306 773 households received access to electricity for the first time, which is 46 773 connections above target. In the main, this is due the good cooperation and support from Eskom and some municipalities and Metros. In addition to this, a number of substations and lines have been upgraded to further ensure that capacity exist for this expansion.

We implemented the Regulatory Accounting System for the Petroleum sector which is used to determine appropriate margins for petrol at wholesale, retail, secondary storage and secondary distribution level. It also seeks to introduce transparency into the market as well as root out inefficiencies, cross subsidization and uncontrolled costs. This provides certainty to investors with regard to the return on assets throughout the petroleum value chain.

I must however hasten to add that the rollout of this system has not been as smooth as we would have expected, with the power relations between oil companies and retail companies continuing to be a challenge. We intend to engage with this matter urgently.

With regard to the development of our gas resources, including the regional gas opportunities in neighbouring countries and our own shale gas resources, a draft of the Gas Utilization Master Plan is being finalized, and will be taken through Cabinet before starting with stakeholder consultations.

Energy efficiency is at the core of our energy security strategy, given its cost effectiveness, speed of deployment and job creation potential. Interventions in public buildings, industry and the residential sectors are pillars in the Energy Efficiency Strategy and Action Plan that we have recently revised. The completed Energy Efficiency Target Monitoring System provides a platform for quantifying the responsiveness of our energy efficiency efforts.

The liquefied petroleum gas maximum refinery gate price regulatory framework discussion document has been developed, with the intention to facilitate the importation of LPG especially during supply constraints in the winter season.

The road map for the implementation of the nuclear procurement programme is progressing well, and the Department is currently working with sister departments and entities to finalise work in this regard.

Honourable members,

I am pleased to announce that for the previous financial year, the Department of Energy was appropriated R6.5 billion, and spent 99.6% of this allocated budget.

The appropriation for this year is R7.4 billion, with 93% of this amount being earmarked for transfer to Municipalities and State Owned Entities. Only the remaining 7% is utilized for the Department‟s operational and capital expenditure. So it is clear that the actual delivery of energy is largely in the hands of other statutory bodies, and we will have to work closely with both SALGA and the relevant state owned entities to keep the lights on.

The 2014/15 appropriation is 14% higher than the 2013/14‟s final appropriation. The increased allocation will enable the expansion of the Integrated National Electrification Programme (INEP) to increase the number of households connected to the electricity grid and also the number of non-grid connections. We will focus on substation infrastructure, and promote energy efficiency through the continuation of the solar water geyser programme.

INEP therefore receives an allocation of R4.1 billion, with Eskom and Municipalities allocated R2.5 billion and R1.6 billion respectively. A further R96 million is allocated to the non-grid electrification programme.

As government we have sought, through Eskom and municipalities, to improve the implementation of energy efficiency and expand the use of clean energy technologies. The Department will continue with the roll out of the Solar Water Heater project, which seeks to make solar water units more affordable and accessible to our citizens. To this end, Eskom will use their R1.6 billion for the installation of more than 200 000 solar water heating units in residential areas

On the nuclear front, R850 million has been allocated to the Department and its relevant agencies in order to undertake further research and development, especially in regard to safety matters. Regulations for the handling of hazardous materials, in terms of international obligations, and the development of nuclear policies and legislation to ensure the peaceful use of nuclear energy, will also be pursued.

Chairperson and Honourable Members

In line with the injunctions of the NDP, my Department is central to the processes of developing policies and innovative energy strategies. We are expected to implement programmes which will ensure that South Africa has an energy sector that promotes economic growth and development, fosters social equity through expanded access to energy services, as well as pursuing environmental sustainability.

Our Departments‟ mandate is unambiguous – To ensure energy security for a growing and job creating economy! We invite everyone to join us in pursuing this.

The President has been unambiguous on what is expected from Ministry of Energy, and what will constitute a radical transformation of the energy sector. The Energy Master Plan has been developed to crystalise the immediate actions that the Department of Energy and the entire Energy sector will have to undertake. I will be undertaking a comprehensive review of the entire sector, and where necessary will bring about structural changes within the Department of Energy, and in the role and functioning of the various State Owned Entities.

In doing so, we will be guided by the need for further diversification of the energy mix. Wind and solar energy sources are growing dramatically, especially in the Northern Cape. Together with imported and locally sourced natural gas, as well as introduction of 9.6 Giga Watt of nuclear power, we will lay the foundations for a new mix of national energy sources.

We are directed to intensify the Integrated National Electrification programme, in pursuit of the universal access targets of the NDP. We will ensure renewed focus and energy towards the critical area of electricity infrastructure upgrades, working with identified municipalities.

The IPP programme will remain another key area of engagement and focus. We will continue to consult and refine the Independent Suppliers and Market Operators Bill (ISMO), which will seek to provide a better regulatory environment for power providers. Once it is ready we will commence with the legislative processes in Parliament.

Chairperson, allow me to highlight some of the key programmes and initiatives that the Department will be focusing on in the financial year, which is also in line with the Medium Term Strategic Framework of Government.

As enjoined by the President in the State of the Nation Address, my immediate priority is to ensure that the Integrated Energy Plan is finalised. This plan must be geared to address the short, medium and long term energy requirements of the country, and be supported by effective policies, institutions, governance systems, and regulation, within a competitive market place.

Given the overall global energy challenges, one of the key objectives of the revised Integrated Energy Plan will be to look at multiple and alternative energy sources. South Africa cannot afford to find itself at the mercy of geo-political developments over which we have no control, and we must find sources that are secure and sovereign.

It is therefore necessary to reflect on the questions we identified as being critical for South Africa‟s energy future such as improved Energy Efficiency, the diversification of our energy mix towards a low carbon economy, finalization of the nuclear power option, future electricity tariff increases, and universal access to modern energy technologies for the un-electrified. Our energy plan should especially address the plight of rural women and youth, and lift them out of a situation of unemployment and energy poverty.

PLANNING & NEW ELECTRICITY GENERATION CAPACITY

The introduction of new power stations across a range of technologies is outlined in the Integrated Resource Plan, which proposes the development of new generation capacity in a way that optimizes costs, promotes job creation and mitigates adverse climate change.

In the period up to 2030, the Integrated Resource Plan makes provision for 9,6 Gigawatts of nuclear power, together with 6,3 Gigawatts of coal power, 11,4 Gigawatts from renewables, and 11,0 Gigawatts from other generation sources.

The implementation of the Plan is well underway. This is evidenced by the IPP Bidding Programme, which has approved the provision of 3 625 Megawatts of capacity from Independent Power Producers. So far the IPP process has lived up to expectations by attracting international investment to the value of about R120 billion. We are confident that this will boost employment growth, and we know we can further improve on this.

We have no intention of abandoning the coal option, but we are determined to find cleaner technologies that will reduce the adverse environmental impact associated with greenhouse gas emissions from coal generation.

Institutionally, we have formed the Carbon Capture and Storage Leadership Forum, which serves a critical role in fast tracking our technology research efforts in collaboration with other countries. The South African National Energy Development Institute (SANEDI), which is our state owned entity responsible for energy research, leads this programme.

You may not be aware that for the past five years, underground coal gasification has been underway at Matimba power station. This programme is aimed at developing the technology needed to exploit our extensive coal reserves in the form of gas rather than through traditional combustion means.

Apart from our local research efforts, we eagerly watch international research developments that exploit coal, using clean technologies. I am glad to report that the Medupi and Kusile power stations, representing our latest technology coal-fired power stations, are ready for state of the art carbon capture and storage processes.

ELECTRIFICATION PROGRAMME

R4.1 billion has been made available for the electrification programme, and we are confident of delivering at least 285 000 new grid and non-grid connections in this budget cycle. For the first time the non-grid programme will also be implemented in urban areas of the country, with a view to rendering a basic electricity service to informal households. This is especially important where it is not safe to supply these households with high-voltage grid electricity.

To improve the non-grid delivery, more service providers will be appointed to assist with this programme. We are also in the process, with the assistance with the EU, to develop a more sustainable delivery model with respect to non-grid programme.

We aim to finalize by the end of this calendar year, the first draft of the Electrification Master Plan to ensure that universal access can be reached by 2025.

GAS AND ASSOCIATED INFRASTRUCTURE

Despite recent discoveries in Mozambique, Tanzania and even locally on our West Coast, the lack of gas infrastructure, including pipelines and storage facilities has made it difficult for gas to feature as a major energy carrier in our current mix.

However the Gas Utilisation Master Plan seeks to anticipate the infrastructure necessary to open up the gas market for the residential, commercial and industrial sectors. The scope includes investigating the development of a gas receiving and storage terminal for liquefied natural gas, and to meet the gas to liquids requirements at the Mossel Bay refinery, as well as investigating the conversion of Eskom‟s diesel plants. The gas infrastructure development effort is accordingly

premised on regional integration with Mozambique in the East, the importation of LNG and the networking of various load centres for transporting and storing shale gas from the Karoo.

These developments herald a new era in the exploitation of this resource for our country, and the private sector is well advised to prepare for their contribution in this regard.

The Integrated Resource Plan targets 2500MW of new gas fired power generation capacity, plus the feedstock needs for the Mossel Bay PetroSA gas to liquid plant. We will soon release the outcomes of a Gas feasibility study that is being completed with collaboration by Transnet, PetroSA, Eskom and government.

Honourable Members,

The prospect for gas to replace imported crude oil in the transport sector is very high on the government agenda, because it bodes well for our macro-economic outlook, particularly in our balance of payments. In the future, gas is likely to be the most common energy carrier for public transport, freight and domestic heating and cooking.

The development of shale gas cannot be dismissed or ignored. On the contrary, we should be learning from others on how to best exploit this resource in the least intrusive and environmentally prudent way. The United States anticipates complete independence from Middle Eastern crude oil by 2020, as a direct result of their development of shale gas reserves. Our government has adopted a cautious and responsible approach that seeks to understand the risks to the environment posed by fracking, and we will ensure, working with the Department of Environmental Affairs, that we implement this programme to the highest environmental standards and regulation.

I am happy to indicate that PetroSA has a dedicated focus on this resource, and has established a unit to ensure it is prepared for shale gas activities.

NUCLEAR ENERGY

The nuclear expansion option is a central feature in our future energy mix, given the emissions reduction target we have set ourselves, and the possibility of catapulting South Africa into the top echelons of the knowledge economy.

Our plan is to introduce some 9.6 Gigawatts of nuclear energy in the next decade, in addition to running Koeberg power station.

Our country track record in running a nuclear programme speaks for itself. Apart from Koeberg for power generation, our current programme includes Pelindaba, currently one of the world‟s biggest producer of medical radio isotopes from low enriched uranium. We are therefore not starting from zero base, in fact, we want to build on the expertise and skills base that already exists in the country.

Honourable Members, I intend to focus on and accelerate all the outstanding matters that will lead to the commencement of the nuclear build programme as envisaged in the IRP. These include the localisation, financing, funding, skills development, fuel cycle and uranium beneficiation strategies to support the nuclear new build programme.

Honourable Chairperson

Regarding the Renewable Energy IPP programme, I am proud to announce that the progress of projects under Window 1 and 2 are 95% on track, with some 350 Mega Watts more green power that will come on line in this financial year in addition to the current 600 Mega Watts.

We have been working towards financial closure for Bid Window 3. Guided by factors such as the volatility of the rand, and in consultation with National Treasury and the Reserve Bank, we have opted to shift the date for financial close to November 2014. This will also allow ESKOM to prepare adequately for the connection of these providers to the grid as planned,

Window 4 of the renewable energy independent power provider programme is on track, with the submission of proposals by August 2014. The scope will include new generation capacity though wind, solar, biomass and hydropower technologies, and will bring up to 1000MW on stream.

Ladies and Gentlemen, in August 2013 the Department released the Small Projects Request for Proposals. The Small Projects Programme seeks to procure energy from small-scale Independent Power Producers, with projects that are between 1 and 5 MW in size. The Department seeks to buy 200 MW in total from SMMEs, generating energy from solar, wind, biomass and landfill gas projects.

One of the biggest challenges regarding the small scale projects is that of providing equity. The Department has taken the initiative to develop standard documents for these projects to reduce transaction costs, and proposed a dedicated fund to assist Small IPPs with transaction costs. This will ensure that new entrepreneurs can also enter the Renewable Energy IPP market. I want to give the small IPP entities and developers the assurance that the fund will be up and running by February 2015, in time for the second round.

BIOFUELS BLENDING FRAMEWORK

In October 2013, the Minister of Energy determined 2015 as the date by which crude oil refining companies will have to blend biofuels into petrol and diesel on a mandatory basis. This has provided certainty to the funders of the potential biofuels manufacturers that their product will indeed enter the market through the oil companies.

In the next two months, our focus will be on finalizing the subsidy framework for the manufacturers and the pricing approach for the blended product. In addition, sustainable harvesting of biofuel feedstock need also to be addressed, and I intend engaging with the Ministers for Agriculture and Rural Development in this regard. Our view is that this will have to be a phased process of finalising the crops to be used and the type of land where it will be produced, with the first phase focusing on crops grown on previously unproductive land, which is not under water irrigation. We could then progressively increase the phases to include different crops and in different parts of the country.

Thousands of jobs are expected to be created through the biofuels value chain, starting with the farming of selected energy crops, the development of the infrastructure for producing, storing and transporting the product to refineries and oil depots. It is also important that small and upcoming farmers to enter the production value chain of bio-fuels. We would also look at opportunities of sourcing these projects from the SADC region to meet our demand.

Chairperson

The process towards the establishment of the Cabinet Energy Security Sub-Committee as directed by the President is being refined and Cabinet will pronounce on this matter shortly. The establishment of this structure will contribute immensely to positioning the energy sector at the apex of our national development plan.

Honourable Members, during the course of this year we will review the operations of the Department of Energy, and will seek to position the organisation to respond to the tasks as set out by the President.

I intend to further strengthen the policy and planning capacity within the Department, as well as establish dedicated capacity for effective organisation wide monitoring and evaluation. We will further streamline and capacitate the Energy Programmes and Projects branch, including the re-positioning and strengthening of our provincial offices to better support provincial and local governments. In this regard, we have already established an Electricity Distribution Response Team in collaboration with other departments and entities to address identified hot spots and the specific Local and District Municipalities that has been highlighted for intervention in the State of the Nation Address.

Furthermore, and as previously publicly stated, I am establishing a Ministerial Advisory Council of Energy, comprised of government, private sector, civil society and academia, to assist me with taking energy to the next level in this country. A Request for Nominations was released yesterday in major Sunday newspapers. I am urging energy sector stakeholders and representatives to submit nominations.

In this financial year, we intend to submit to this House the following pieces of legislation:

  • The Electricity Regulation Amendment Bill which will provide a regulatory framework that promotes IPP participation.
  • The National Energy Regulator Amendment Bill which will Improve credibility of the decision making process by establishing an Appeal Board; Improve the governance, accountability of the regulator; and
  • To Promote efficient regulation of the energy sector and improve governance.
  • The Gas Amendment Bill that will promote an efficient, competitive and responsive economic growth; and leveraging available gas resources, and
  • The Independent Systems and Market Operator (ISMO) Bill to assist with the planning of generation, implement electricity dispatch, coordinate electricity wholesale by generators and act as buyer of electricity.
  • The support of the Portfolio Committee is sought to process these critical pieces of legislation and in so doing, further support the efforts towards a more responsive energy system.

Honourable Chairperson and Members,

I would like to take this opportunity to express my sincere gratitude to my predecessors, Ms Dipuo Peters and Mr Ben Martins for laying such a solid foundation.

I want thank the Deputy Minister, Ambassador Thembisile Majola, the Chairpersons and members of the Portfolio Committee and the Select Committee, for their guidance, and the Acting Director-General Mr. Tseliso Maqubela, together with the senior officials and staff of the Department for their continued support for the achievement of our goals.

My deep appreciation is also extended to the State Owned Entities and Energy Sector Stakeholders for their invaluable support and contributions.

I am confident that drawing from past practices, feedback and the comments received during our consultation and engagement, we can build on the solid foundations to drive the required radical and urgent change in the energy sector.

Lastly, I must admit that striving to achieve a balance between work and family is always challenging, especially as a single parent. Fortunately I have the support and understanding of my family, particularly my sons, Terrence and Austin. This has carried me through many of the difficulties and the challenges, and made many things possible. I thank them both very deeply for this.

Honourable Members,

The next five years is about moving South Africa forward towards an Energy Secure Future! I invite all South Africans to be part of this.

It is my honour to present before this House the 2014/2015 Budget Vote of the Department of Energy.

I thank you.

 

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DoE will align itself with NDP

Minister of Energy, Tina Joemat-Pettersson.

The Department of Energy (DoE) will ensure a maximum level of alignment between the National Development Plan (NDP) and the Strategic and Annual Performance Plans of the department.

“The next five years is about moving South Africa forward towards a secure energy future,” Minister of Energy Tina Joemat-Pettersson told the portfolio committee on energy.

The DoE has commenced the process of strategic planning to produce a new five year strategic plan and an updated 2014/15 Annual Performance Plan (APP). This new strategic plan, together with the updated APP, will be aligned with the Medium Term Strategic Framework, and is expected to set out in detail how the department will respond to the injunctions of the NDP as outlined by the President in his State of the Nation Address (SONA). It will also set clear targets and the systems and processes to monitor the implementation of these during the same period.

Pettersson said she is determined to bring consistency and certainty with regard to the policy and legislative environment. The DoE will therefore put a strong and accelerated effort into work in several areas. Among other, these include:

  • finalise the Integrated Energy Plan or Energy Master Plan, together with its component parts, the Integrated Resource Plan and the Gas Utilisation Master Plan
  • work closely with the Department of Mineral Resources to resolve the issues that will facilitate investment in the gas sector
  • regional integration within SADC to diversify South Africa’s energy mix and complement the fossil based energy sector
  • accelerate all the outstanding matters that lead to the commencement of a nuclear build programme
  • address the problems that Eskom faces in the short to medium term, including its funding model as it plays its rightful role in the electricity sector
  • finalise the regulatory framework on pricing for bio-fuels
  • accelerate the roll-out of electricity to reach the county’s universal access targets
  • address the maintenance and refurbishment backlogs in the electrification distribution industry.

In line with the SONA, Pettersson said the department will work in close co-operation with other spheres of government to render service upliftment support to specific municipalities and district municipalities.

The DoE intends to ensure that further work is done with regards to the re-positioning and strengthening of State Owned Entities, especially with regard to CEF and its subsidiaries, as well as SANEDI and the recently established Nuclear Radio Active Waste Disposal Institute.

“I am not willing to yield or compromise on this, as our State Owned Entities is central to attaining our goals as a developmental state,” said Pettersson. “The energy sector has been identified as one of the biggest constraints to economic development in our country and I intend to correct that.”

SA News

01 July 2014

 

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State-owned entities poor at disclosure

 State-owned entities poor at disclosure

LEVELS of disclosure at South Africa’s state-owned companies (SOC) are generally dismal, although a number of companies such as Eskom, Transnet and Telkom indicate that world-class standards are attainable.

While there are indications that reporting standards are improving, in a few notable cases such as the Central Energy Fund, the SABC and the Post Office the already poor levels of disclosure have actually deteriorated.

Things are particularly grim at the Independent Development Trust, where for the second year running no annual report was available.

The latest survey of integrated reporting trends at SOCs, which is undertaken annually by audit firm Nkonki, reveals a rather grim picture of patches of excellence overshadowed by near indifference by many of our SOCs.

The results of the survey, which is based on annual reports, indicate that the new public enterprises minister, who is responsible for most but not all of the SOCs, is facing major challenges.

The survey looked at financial 2013 reports published by the 20 largest SOCs, which are described in terms of the Public Finance Management Act as schedule 2 companies, to ascertain whether minimum disclosure requirements were being adhered to.

It focused on disclosure relating to 18 areas, including ethical leadership, board membership and remuneration, audit committees, internal audits, governance of risk, sustainability, compliance with laws and regulations, and integrated reporting.

On average, the SOCs exceeded 50% of the “expected minimum disclosure requirements” for just over half of the 18 areas about which they are required to provide information.

The best levels of disclosure were in areas relating to financials, and the worst related to sustainability issues.

Details on directors such as their qualifications and remunerations were also apparently hard to come by.

Thuto Masasa, a partner at Nkonki, said that the survey, now in its third year, did reveal the encouraging fact that the overall levels of disclosure were improving.

She said that companies such as Eskom and Transnet were playing a proactive role in developing disclosure standards on an international scale.

Both are participating in the International Integrated Reporting Council pilot programme.

Ms Masasa said the survey aimed to encourage the SOCs to improve their standards of disclosure.

She noted that unlisted SOCs did not have the benefit of the pressure imposed through a JSE listing.

Only 10 of the 20 SOCs managed to achieve an overall rating above 50%.

In addition to Eskom, Transnet and Telkom, which came first, second and third respectively, Denel, IDC, South African Forestry Company, Development Bank, South African Nuclear Energy, Land and Agricultural Development Bank and Air Traffic and Navigation Services all managed to scrape a pass.

The 10 SOCs that failed to make the grade were Trans-Caledon Tunnel Authority, Airports Company of South Africa, South African Airways, Broadband Infraco, SA Express, Alexkor, SABC, Armaments Corporation, Central Energy Fund and Post Office.

Business Day

22 June 2014

 

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Mthombo an imagination capturing project that goes beyond the dream

The industrial future of Nelson Mandela Bay hinges on a number of items, but none so powerful and imagination capturing as PetroSA’s Project Mthombo – a project that will not only change the industrial face of the province, but also diversify and re-dimension the provincial economy.

The possibilities in PetroSA’s Project Mthombo are endless – and businesses need to start planning for this future by looking at, and planning for, the opportunities that will arise. The globally competitive refinery is key to the country’s security of liquid fuels supply and ability to meet international clean fuel standards (currently Euro V.) It needs to be remembered that, by 2015, the country’s liquid fuels deficit will be around 200,000barrels/ day.

Project Mthombo will assist South Africa to achieve a quarter of its energy needs while bringing us into the 21st and 22nd centuries. Project Mthombo, a US$10bn 300,000 barrels/day oil refinery, is set to come on stream in the Coega IDZ around 2020, spurning massive opportunities. The proposed “utility island” serving the refinery will include a desalination plant and power station, which will channel excess capacity into the city’s water and electricity supply networks, enhancing industry’s ability to do business.

The project also presents significant up and downstream business opportunities, which have the potential to contribute substantially to economic growth in both the industrialised urban areas and the rural heartland of the Eastern Cape Province. This will be through localisation

opportunities and the development of a petrochemicals cluster that will include biofuels for mixing with the refinery’s products and potentially fertilisers and plastics. Socio-economic forecasts indicate that the project will create an estimated 18,500 direct and indirect jobs at the height of the construction phase and an estimated 12,000 direct and indirect jobs through its operation. The forecasts also predict an estimated 5.5% increase in economic growth for the Eastern Cape due to direct, indirect and induced impacts.

Kevin Hustler, CEO of the Nelson Mandela Bay Business Chamber, has committed the Chamber as an advocate for Project Mthombo.

“The Nelson Mandela Bay Business Chamber is a proponent of Project Mthombo, the oil refinery at Coega, through the Multi- Stakeholder Interest Group which is preparing the city in terms of infrastructure skills and supply chain development,” says Hustler. “The Business Chamber will continue to advocate for Project Mthombo in terms of its immense potential to impact our region’s socio-economic landscape. The refinery is a path to job creation, industrial diversification, and long-term poverty relief.”

Developmental State

Project Mthombo will contribute to achieving the developmental objectives of the New Growth Path, given its employment generation potential. The project also speaks to national policy in scaling up efforts to promote long-term industrialisation and industrial diversification. Its localisation programme potential is also a very significant factor in leveraging SA’s industry into the global supply chain. Due to its job creation and infrastructure benefits, the project will also impact positively on gross domestic product, gross geographic product, taxes and household income, as well as the rates base of the Nelson Mandela Bay Municipality.

Industrial Diversification

The refinery opens up the opportunity for development of a petrochemicals cluster, making productive use of the additional products and by-products of the refining process, such as asphalts, lubricants, chemicals and polymers (plastics.) This will both support and be supported by agricultural development in rural areas, particularly for bio-fuels. The need for a wide range of support services, such as transport, engineering and ICT as well as “soft skills” for the refinery and its extensive infrastructure will also create on-going business opportunities for new and existing companies in the province. The area has a wide variety of highly-skilled – but often under-utilised – companies that are based in Nelson Mandela Bay but do much of their work, or export most of their product, outside of the province and the country.

Agriculture, Agroprocessing & Rural Development

The National Clean Fuels Programme targets replacement of 2% of petrol and diesel fuels with bio-fuels over the next five years. This requirement generates a demand for agricultural products (soya, canola) from the Eastern Cape’s rural areas and integrates with the provincial economic development strategy, which identifies bio-fuels as a growth industry. As a by-product of the refining process, sulphur could be further beneficiated into sulphuric acid, which is widely used in pulp and paper manufacturing. This links to the Eastern Cape’s strong forestry base that is in need of local beneficiation. Sulphur is also a key ingredient in fertilizers opening up further industrial opportunities as well as the supply of fertilizer to farming activities in rural areas, including the farming of crops such as canola for bio-fuels, which in turn feed into the refinery’s need for a bio-fuel component in its end product. There will also be a positive logistics impact, with rail links being required between the east of the province, the former Transkei and the Coega IDZ. This will also specifically allow other agricultural produce such as maize to get to markets, which is not the case at present. The potential therefore exists for further agro-beneficiation.

Sustainable Jobs

The strength of Project Mthombo and the up and downstream opportunities, which it presents, lies in the creation of sustainable jobs. The refinery is an investment in productive infrastructure, which in turn creates other economic and employment opportunities. The backward linkages into the rural hinterland created by the project also support sustainable job creation in agriculture and agro-processing and address the issue of uneven spatial development between urban and rural areas.

The skills developed will largely be in those areas where SA currently has dire shortages – e.g. metal work, fitting, welding, instrumentation, engineering, electrical and electronic – technical skills which are associated with employment in a range of manufacturing environments. Thus skills developed through the refinery project will be portable into other industrial opportunities. There is a strong business case for Project Mthombo. But also there is distinct opportunity for the Nelson Mandela Bay and the Eastern Cape business community – both to benefit and diversify. There is no impediment to Project Mthombo, and hard, but tremendously important decisions must be taken or we will not achieve the first rank among developing countries nor control our own destiny.

 

R2bn Saldanha Bay oil facility gets environmental approval

Newly formed oil group Oiltanking MOGS Saldanha (OTMS), a joint venture (JV) between Oiltanking Grindrod Calulo (OTGC) Holdings and Mining, Oil and Gas Services (MOGS), has been granted environmental authorisation for the development and construction of a R2-billion commercial crude oil blending and storage terminal, in Saldanha Bay.

The approval, which was granted by the Western Cape Department of Environmental Affairs and Development Planning, followed the conclusion of eight specialist studies, which were undertaken by independent experts as part of the environmental-impact assessment (EIA).

The envisaged facility will have a total capacity of 13.2-million barrels, comprising twelve 1.1-million barrel in-ground concrete tanks, which are designed to ensure that, should an oil leak develop in one of the tanks, the oil will be collected in a separate layer underneath the tanks and relayed to a special collection point from where it will be pumped back into the tanks.

This layer will be continuously monitored.

“Although not required legally, OTMS decided to also conduct a marine oil pollution control study in addition to the EIA to ensure that any and all of its environmental risks are adequately understood and addressed,” the group said in a statement.

MOGS, which initiated the Saldanha Bay project in 2011, had completed the prefeasibility studies and design of the facility and was in the final stages of obtaining the required statutory approvals.

Engineering News reported in September that Saldanha Bay was regarded as the most suitable location for the global crude trans-shipment hub the JV envisaged, as it was close to strategic tanker routes between key oil-producing regions and major oil-consuming markets.

OTGC Holdings is an independent bulk liquid storage provider in South Africa, while MOGS is a South African company owned 100% by community-based investment company Royal Bafokeng Holdings.

25 April 2013

Engineering News

Natalie Greve