Archive | Energy

Zuma’s nuclear energy call awaits Treasury

Nuclear energy awaits funding model…..

Sent to clients Dec 10 ….Cabinet’s approval of a financing model for the Nuclear New Build programme is all that is seriously holding up the nuclear energy procurement, the Department of Energy (DOE) has told Parliament’s Select Committee on Economic Development.

Z MbamboThis was said by Zizamele Mbambo, DDG, Nuclear, DOE, when giving the most recent update to parliamentarians on the background to the South Africa’s nuclear programme. In giving the history of SA nuclear development, he said that South Africa began its nuclear energy power plan in 1985 with Koeberg in Cape Town and the country should have its second plant up and running by 2023.

This much later programme was the culmination of a process which was re-started by Eskom in 2006 with the approval of the IAEA but then stopped by SA during the financial crisis in 2008, he said.

Start-up again

Later in 2013, much had changed on the nuclear energy supply situation because of technological advances in safety and the Russian and Japanese experiences. South Africa therefore requested in that year a specialised report from IAEA with their recommendations, the first country to do so where there was already a successful nuclear energy programme running.

IAEA supplied such a report with ten recommendations which South Africa will strictly adhere to, IAEA Mbambo said, these recommendations being in the public domain. The New Build programme would only be started upon a certification that all such recommendations had been met, a requirement of South Africa’s own nuclear energy regulator.

The National Nuclear Energy Executive Coordination Committee was earlier established by Cabinet in 2011 and the “2030” plan was endorsed by Cabinet the following year. In 2013, DOE was appointed as procuring agency. The Nuclear Energy Policy of 2008 still shapes South Africa’s vision for nuclear power, Zizamele Mbambo said.

Nuclear sellers

Inter-governmental agreements (IGAs) have so far been signed with five vendor countries and these IGAs lay the foundation for trade, exchange, nuclear technology and procurement with the particular vendor. It was conditional that all vendor nations must have signed nuclear non-proliferation agreements.

The principle behind South Africa’s Nuclear New Build programme was to replace the retiring coal fleet meeting additional demands and providing certainty to investors on energy, he said.

In answer to parliamentary questioning on the IGAs signed as a result of a “vendor parade”, Mbambo stated the following:-

The Russian Federation had agreed to assist in design, construction, operation and decommissioning of the nuclear units. Russia would also assist in the localisation of the manufacture of components for the nuclear units.
France would assist in applied research and development, and also with accounting and physical protection of nuclear waste.
China would assist with experience exchange, personnel training and enhancing infrastructure development.
The USA would assist in development design, construction, operational maintenance and use of reactors for reactor experiments. USA would also assist with health, safety and environmental considerations.
South Korea would assist in the use of nuclear energy for electricity generation, heating and desalination of salt water, and in dealing with radioactive waste.
Canada and Japan were in negotiation with SA, and these IGAs were in the final stages.

SA’s vision, Mbambo commented, was to become autonomous in nuclear energy from the beginning to end of the value chain.

Waste worries

He would not comment, however, on the court case to be heard with Earthlife on the issue of nuclear logoradioactive waste as this was sub-judice, he said.    He also said IAEA had been perfectly happy with previous Koeberg arrangements as far as waste was concerned but obviously plans had to be extended.

In answer to MPs questions on cost and the next stage of the programme, he agreed that nuclear option was indeed highly capital intensive. However within 20 years, Mbambo said, the capital investment would have been reduced to nil and in view of the long 80-year life of a plant, the following 60 years would come with nil capital cost, resulting in cheaper electricity relative to the time frame.

Future dreams

It was foreseen, he said, that with nuclear energy having lower maintenance and fuel costs the relative costs of electricity tariffs to industry and consumer could be reduced also in relative terms during the 60 year period and energy sales could become a “cash cow”.

When asked about hydro energy sources and gas development, Mbambo said this was outside of his brief to answer.
Other articles in this category or as background
National nuclear control centre now in place – ParlyReportSA
Minister Joemat-Pettersson clams up on nuclear – ParlyReportSA
Nuclear partner details awaited – ParlyReportSA

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PetroSA on the rocks for R14.5bn

Project Apollo plan to save PetroSA…

Sent to clients 6 Oct.…..A team comprising of industry experts is now defining a new strategy to save the PetroSA struggling offshorePetroSA logo gas project on the East Coast.   The experts were not named but the exercise is entitled Project Apollo and reports were given to Parliament that the team has progressed well so far, said controlling body Central Energy Fund.

Despite producing a balance sheet that shows a technical cash profit of R2.5bn in simplistic terms made up of revenue less operating costs, in reality PetroSA is clearly beyond business rescue in proper commercial terms unless it manages to get a bail-out from Treasury to save the troubled entity from written off “impairments” of R14,5bn. But business rescue is on the way it would appear.

R11.7bn of the “impairment” was as a result under performance of its Project Ikhwezi to supply gas onshore to Mossgas.

Reality sets in

The total loss for 2014/5 was in reality R14.6bn after tax.      Project Apollo will now tackle the main cause of the loss at Ikwhezi, options stated as including “the maximisation of a number of upstream initiatives; the utilisation of tail gas; and how the gas-to-liquid refinery itself can be optimised with the new, revised and “limited under-supply of feedstock.”

cef logoThe Central Energy Fund (CFE), acting as the parent body for PetroSA, told Parliament that it is applying for such assistance, PetroSA being flagged by Cabinet some twelve years ago as “South Africa’s new state oil company”. CEF described PetroSA’s performance as merely “disappointing”, which raised the ire of most parliamentarians.

Those present

To add pain to the proceedings for Deputy Minister of Energy, Thembisile Majola, and senior heads of the Department of Energy (DOE) also in attendance together with the full board of CFE represented by new acting Chairman Wilfred Ngubane, the auditor general’s (AG) highly critical findings were read out one by one to MPs of the Portfolio Committee on Energy.

All this resulted in the remark from Opposition member, Gordon Mackay, that PetroSA “instead of becoming afikile majola national oil company had become a national disaster”. Criticism was levelled at both CEF and PetroSA across party lines, Chairman Fikile Majola demanding that Parliament conducts its own forensic audit and investigation into the facts that had led PetroSA to achieve such spectacular losses.

It appears that in the total accounting of the loss of R14.6bn for the year under review, R1.8m was also incurred in the form of non-performance penalties; stolen items of R110,000; over payments in retrenchment packages of some R3m; and R55,000 stock losses. Irregular transactions in contravention of company policy amounted to some R17m, the AG noted.

Lack of industry skills

Although the AG’s report was “unqualified” in terms of correct reporting, lack of management controls and bad investments were identified by the AG as the problem. In fact, acting CEO of PetroSA, Mapula Modipa, clearly inferred that lack of skills generally in the particular industry, lack of background knowledge in the international oil investment world and lack of experience in upstream strategic planning had led PetroSA year after year into its loss situation.

Particularly referring to troublesome investments in Ghana, Equatorial Guinea and continued exploration and production at Ikhwezi resulting in the “impairment”, a sort of write down of assets totalling R11.7bn, reports have been submitted before to the Portfolio Committee on Energy over the last two years. Warnings were given.

However in this meeting the AG’s views on the subject were under discussion and the terminology used by the AG could only be interpreted, as put by MPs, as poor management decision-making, lack of knowledge of the oil industry and the appropriate management skills in that area.

Roughnecks wrestle pipe on a True Company oil drilling rig outside WatfordHowever, over the years going back over previous annual reports for the last five years with forwards by Ministers and Cabinet statements issued over the period, it becomes self-evident that the “drive” to establish PetroSA as a state entity in the fuel and gas industry was politically driven, coupled with (as acting CEO Mapula Modipa had inferred) inexperience in the top echelons.

Still the Mossgas problem onshore

However, self- evident this year were the declining revenues from the wells at sea supplying Mossgas, where it was stated that now one wells had been abandoned, three were in operation and two had yet to be drilled. Project Inkwezi, against a target of 242bn barrels per cubic feet (bcf) only delivered 25 bcf from three wells. A “joint turnaround steering committee” had been formed to help on governance issues, technical performance and the speeding up of decision making. But the bcf is unlikely to change

Part of the new plan has involved of a “head count reduction” and employees had been notified. It was admitted that PetroSA had an obligation to rehabilitate or abandon its offshore and onshore operations costed at R9.3m in terms of the National Environmental Management Act and a funding gap of R9.3m now had to be bridged in the immediate future to pay this further outstanding in terms of the Act.

Further forensic audit

The cross-party call for an independent parliamentary forensic investigation that was made (which included thegordon mackay DA chairperson Fikile Majola as the driver behind the motion) “will hopefully not just result in a blame game”, said Opposition MP Mackay “but get to the bottom of how such an irresponsible number of management decisions with public money took place over so long a period.”

Chairperson Majola (ANC) concluded “This amount of money (R14, 5bn) cannot just be written off without someone being responsible.” He added, “There has appeared much difference between the abilities of technical staff and the technical knowledge of the leaders and decision makers on the board of PetroSA.”

Minister of Energy, Ms Joemat-Pettersson, was again absent from the meeting. However, earlier, in the meeting, the Deputy Minister standing in for her, said “when all is said and done we intend staying in this business”.

Nil from Necsa

necsaA meeting following in the same day, following the CEF presentation, was a report from the Nuclear Energy Corporation (Necsa) which failed to happen because Necsa were unable to produce an annual report or any report, Minister Joemat-Pettersson having obtained an extension of one month to the end of October for the annual report to be ready. Chairperson Majola said that the meeting could not take place without a financial report since oversight of such report was their mandate.

Opposition members complained that not only had Parliament’s time been wasted but that the whole instruction for Necsa to be present “appeared to be a media exercise to show that the governing party was on the ball”.

A litany of problems
The extension for the Annual Report conclusion had been granted to the Minister in terms of the Public Finance Management Act (PMFA), a fact well known, but the media were present in strength in the morning not only for the CEF’s explanation for the PetroSA loss but in the afternoon for Necsa explanation of its loss as a regulatory body, in the light of current media reports on irregularities, staff resignations and dismissals.

Other articles in this category or as background
PetroSA has high hopes with the Chinese – ParlyReportSA
CEF hurt by Mossel Bay losses – ParlyReportSA
Better year for PetroSA with offshore gas potential – ParlyReport

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Gas undoubtedly on energy back burner

Energy mix on gas unresolved…..

LP gasNot one word on gas and gas exploration, gas pipelines or gas as a contributor to the integrated resources plan has passed through Parliament in nearly one year. The last word was in respect of gas, whether oceanic or land-based, was the knowledge that fracking regulations had been published, the dropping of the oil price seeming to cool off any comment and certainly statements by international investors and companies.
President Zuma has, however made passing reference to Operation Phakisa, the plan to develop South Africa’s oceanic resources but most parliamentary reference to this programme has been in reference to the recent press releases by government in the form of a long term wish to build up South Africa’s maritime ability; create an international ship register and regulate for a merchant shipping fleet.
Going back a bit
In a parliamentary question in the National Assembly last year, Mr. S J NJIKELANAa, previously chairperson of the Energy Portfolio Committee, asked for a written reply by the then Minister of Energy on how far gas exploration had progressed and what urgent state intervention was planned, particularly as far as containment of fuel prices was concerned.
The reply came from the Department of Energy (DOE) in a reply that was somewhat evasive in that it summed what everybody knows; that the Integrated Resource Plan (IRP); the Integrated Energy Plan (IEP;) and the Gas Utilisation Master Plan (GUMP) are amongst the measures which were developed to improve South Africa’s multi-source security of energy supply.
The reply at the time gave responses on the then stage of renewable energy aggregating to cumulative contribution of 17800 MW to the IRP’s final estimate of energy from all sources of 40 000 Megawatts (MW). All of this really helped nobody.

Sourcing of energy
The second contributor to the formula was nuclear power contributing a much quoted 9600MW (and now expected to be more) and hydropower at 2600 MW, with“75% of new generation capacity being derived from energy sources other than coal”, it was stated.

 DOE finally got round to GUMP, describing it as “the development of a gas pipeline infrastructure for South Africa’s needs and to connect South Africa with African countries endowed with vast natural gas resources” but at the time DOE was still recovering from the shock of splitting up from environmental affairs and could not separate gas exploration from mining exploration, in that the Department of Mineral Resources was deeply involved. A total figure for gas has not been formulated.

Another problem for DOE.

In reality, the Petroleum Agency of South Africa (PASA) is technically responsible for GUMP although gas exploration seaDOE’s hydrocarbons division seemed to have been lumped with the problem of what has been described by most authorities and energy specialists as an “exciting hope” for solving SA’s energy problems.
In the meanwhile, it has become the poor child of the energy mix, Minister Joemat-Pettersson recently explaining last week DOE’s poor performance and lack of response on the gas issue as being due to short staffing and “too many issues” on hand.

Last definition

GUMP in fact, (when Parliament was last told} would take a 30-year view of the gas industry from regulatory, economic and social perspectives and this was in the final stage of internal approval and was expected to be released for public comment during the second quarter of the 2015 financial year.
The request for IP proposals for gas-fired generation through a gas-to-power procurement programme for a combined 3 126 MW allocation was expected to be released to the market in September this year, with a bid submission phase planned for the first quarter of 2016.

It seems that South Africa’s DOE can only handle one problem at a time. First it was Eskom and electricity and then the nuclear tendering process, which is in fact a very long term solution to South Africa’s energy problem, as put by one member.

Behind closed doors

Gas exploration, as a subject in itself, benefited from a final decision (which in fact is still mostly rumour in Parliament and unreported) that the Minister Rob Davies’s solution not to acquire 20% -25% “free carry” in gas exploration “finds” seems to be the last definitive action to be taken by government on the whole question of gas exploitation and development.

Meanwhile, Minister Joemat-Pettersson, Minister of Energy, was quoted in the media (and we quote tina-joemattEngineering News specifically) as saying that nuclear power was staying at 9600MW and hydropower at 2600 MW.
The Minister added, “We have paid little attention to gas . . . We have been preoccupied with nuclear [energy].  The South Africa we [are] dealing with now is not the same [as the one we dealt with] in 2013 [when many energy-generation plans were put into play]; the scenarios have changed,” she said to the Creamer organisation.

Not on the agenda

In the remaining few weeks of the third parliamentary calendar sessions, no meetings of the parliamentary committee on energy are scheduled for this vital component of the energy mix, although the anti-fracking lobby was particularly evident at a recent energy committee meeting on the five nuclear vendor agreements.

karoo2They were particularly agitated to hear that the South Korean nuclear vendor offers included development of uranium deposits as part of their deal, such deposits known to be in the Karoo. The only movement recently therefore on gas development would seem to be in the area of Sasol development in infrastructure development locally, presumably in pipelines, and a rather “cool” statement from Shell Oil on fracking possibilities in the Karoo related the world price of oil.
The shortage of liquid petroleum gas (LPG) to meet market demand appears to be the only gas issue to coming before Parliament in the near future.
Other articles in this category or as background
Fracking, shale gas gets nearer – ParlyReportSA
Competition Commission turns to LP gas market – ParlyReportSA
Gas Utilisation Master Plan gets things going – ParlyReportSA
Oil sea gas/debate restarted by Parliament
Uncertainty in oil and gas exploration industry

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Strategic fuel stock supply has problems

Foggy picture on fuel supplies…

Ageing refineries and failure to finalise financial planning with National Treasury on levies for strategic fuel stocks held in much-needed fuel storage facilities, are part of the problem faced by planners in the fuel industry and government, according to recent parliamentary meetings.

A confused picture emerged from a recent portfolio committee on energy during a meeting between Thembisile Majolacommittee and the Department of Energy (DOE) on behalf of the Strategic Fuel Fund (SFF).

Deputy Minister of Energy, Thembisile Majola, was present for the entire meeting as a participant in the debate, following the presentation on the strategic fuel stocks position by both DOE’s Deputy Director-General, Tseliso Maqubela, and Muzi Mkhize, Chief Director, Hydrocarbons Policy, at DOE.

CEO missing

In fact, not only was the outcome of the meeting unclear but occurred as an unscheduled event until the day in question.    It was also advised that that nobody in DOE knew the whereabouts of the SFF’s CEO, whose office had been found locked, whereabouts of the CEO himself unknown. He was suspected of being on the lookout for a new post, an apologetic member of SFF said.

Neither was the chairperson of SFF present or the main elected board, there being only one of six SFF board members at the meeting. The portfolio chairperson, Fikile Majola, confirmed that there had been major misunderstandings with parliamentary invitations but that did not explain the apparent disinterest by the SFF board itself in reporting to Parliament. The presentations were therefore purely by the Ministry and senior officials of the DOE.

Parliamentarians were told by DOE that strategic fuel stocks were defined as both crude oil and refined products and held by government and/or oil companies to cater for catastrophes or severe fuel supply disruptions.

The price of failure

Products to be kept as strategic stock included diesel, petrol, jet fuel and liquid petroleum gas (LPG).   As far back as 2006 it had been estimated that a “no stock” fuel crisis situation could result in a loss to GDP in South Africa of R1bn a day. This fact caused the Deputy Minister to remark that such a situation in 2015 “would make the current Eskom crisis seem like a walk in the park”.

Muzi Mkhize of DOE said strategic stocks would be released only upon declaration of a state of emergency by the Minister of Energy and were like an insurance policy. The SFF was responsible for the procurement, maintenance and management of strategic stocks held by government and oil companies likewise were responsible for the strategic stocks they held according to arrangements with the state.

The cost of storage

With regard to the financing of strategic stocks, a draft policy document was still being debated with National Treasury on the basis of a suggested levy of six cents per litre on petrol, diesel and jet fuel to finance procurement of stocks and the construction of storage facilities for refined products with operational expenses.

Tesliso MaqubelaTseliso Maqubela of DoE said the management by DOE of liquid fuels in the country was split into two divisions, policy and planning under one branch of  DoE and implementation, after approval by Cabinet, as another division. In that sense all members were present at the portfolio committee briefing, Maqubela assured parliamentarians, including Dr. Chris Cooper of Central Energy Fund under whom SFF used to fall and who was particularly acquainted with all issues. Present also was the CFO of SFF and the Chief Operations Officer.

Less in the cupboard

DDG Maqubela explained that it was originally required that South Africa keep 90 days of net imports but on an analysis of the current situation, it was proposed that the country keep a total of 60 days of strategic stocks and oil companies would be obligated to keep 14 days of refined products defined as strategic.

Africa now included

South Africa was a net importer of crude oil and refined petroleum products, he said, and currently over 50% of the country’s imported crude oil was from Middle Eastern countries whilst before it nearly all came from the Middle East. However, the country also now received 12% of its crude oil from Angola and 31% from Nigeria, which had changed the picture particularly as far as lead times and transportation were concerned.

Maqubela said there was no crisis in strategic stocks, “although there were emerging risks”. He reassured members, saying that on a day-to-day basis, he personally interacted with all the companies in the industry and there was certainly no crisis but the country did not have sufficient storage capacity for LPG.  This had to be resolved quickly and this was an immediate problem, he said.

“If the Chevron refinery went down for example, as it recently did, there would be more serious problemschevron tank in supplying the Western Cape with LPG. Therefore there needed to be an alternative for Chevron, which was why the DoE supported the granting of any foreign group such as Burgan Cape with a terminal licences for the construction of an import terminal and who had satisfactory BEE partnerships. The country could not rely on one facility for any products in any one area, he said.

Oil companies to keep refined product

The other issue, Maqubela said, was that the country was experiencing a lot of unplanned refinery shutdowns, primarily because of their age and the country needed a new refinery. The National Development Plan (NDP) stated that by 2017 a decision needed to be taken on refining, he remarked.

When one of the refineries at the coast had a problem, the country ran into “challenges” and one of the proposals which would be made at policy division level was that the strategic stocks policy needed to ensure that oil companies kept enough buffer stock at their own cost. The DoE believed, he said, given recent experiences that the country needed storage facilities to be built in key cities across the country, particularly in places such as Kimberley and East London.

chevron2Generated cash flows were used to maintain the infrastructure of keeping stocks and to fund all SFF’s operational expenditure. In 2014, the entity had generated R197 million from leasing its tanks for crude oil. Excess funds were transferred into cash reserves. The SFF received no allocation from government. In real terms, the R2.6bn revenue generated by the SFF in 1995 was more than ten times higher than the R198m revenue generated in 2015. SFF was a non-profit Section 21 company.

SFF’s operating costs between 2013 and 2015 had therefore been below budget. In the 2014/15 financial year, SFF’s revenue had been around R198m, as stated — a significant increase from the R93m in 2013/14.

In reserve

Mfano Nkutha, Chief Operations Officer, SFF, said SFF had two storage facilities at Saldanha and Milnerton, both in the Western Cape. Saldanha currently had six underground tanks holding 7.5m barrels each. Milnerton had 39 smaller tanks, holding 200 000 barrels above ground. There were no strategic stocks at the facilities. The SFF had an asset base where it accumulated interest on cash reserves and leased out storage space to crude oil trading companies.

Some of the new locations under consideration were Island View (Durban), Richards Bay port, East London, Cape Town port and Jameson-Park precinct. However, the basic matters still remained which were the finalisation of stock level requirements; some sort of agreement on funding and levies with National Treasury and feasibility studies for any proposed storage sites.

Southern African implications

In answer to the many questions from MPs, Maquebela said that in the broader context of energymapafrica&sa supplies, indeed the strategic fuel stocks policy framework had yet to be finalised but “all the time things were constantly changing in the global space and within the Southern African Development Community (SADC) region. These changes needed to be included in the policy framework”, he said.

“Botswana had been building huge storage tanks since 2010 as well and other private sector investments were in Coega and in Richards Bay. These had changed the scenario for the strategic stock framework.”      The multi-product pipeline had changed much, DDG Maqubela said, and historically disadvantaged South Africans (HDSAs) now operated in the fuel storage and fuel industry space but a policy was needed to look into a more integrated approach.

No one has shut shop.

Answering more questions, he said, “There needed to be a seamless release of stocks when the situation arose”. He commented on media reports and said that no refinery had been closed, and those which were currently not operating were on maintenance shutdowns. Chevron had not been closed — they were on a planned maintenance shutdown, he said, presumably referring to the verbal spat revealed in Parliament between Chevron, Burgan and DOE over the new Burgan terminal.

Every year, DDG Maquebela said, the DoE received a schedule of planned shutdowns from the oil companies, because shutdowns were required by law. The DoE’s role was to ensure that there were no overlapping shutdowns. The problem arose when the refineries did not stick to their schedules because of unforeseen circumstances, primarily those relating to the ageing infrastructure. Another problem which the country needed to explore was that the availability and reliability of rotating maintenance crews.

Overview of supplies

He said Chevron was currently operating at 30% capacity and Shell and BP had been experiencing some difficulties. Engen had recently undergone a planned maintenance shutdown, but it had come back on line satisfactorily, while Sasol Secunda was still dealing with a planned maintenance shutdown. PetroSA was operating at 50% capacity.

PetroSA logoIn answer to MPs questions on what had happened to DOE’s Coega refinery plan, Project Mthombo, Maquebela of DOE ducked the question by saying the NDP indicated that a decision needed to have been taken by 2017.   He added the DoE was not waiting until 2017 to make a decision, however. The building of the Mthombo refinery, which had been stopped, was being “reconfigured but there were some challenges in this regard.”

Priorities order of the day

Deputy Minister Majola said of the delay on the part of National Treasury was the splitting of the Department of Energy from environmental affairs and the fact that “electricity had become the main issue and Eskom’s challenges had taken priority in the energy space.”

She maintained much so many of the “challenges in DOE policy were concentrated under one branch it was therefore not humanly possible to manage all the work.” This was something which was impeding the progress of the DoE regarding policy, she said. There was also a misalignment between those who developed policy and those who implemented policy on a day-to-day basis. The DoE needed time to make a re-assessment of itself.
Other articles in this category or as background
Chevron loses with Nersa on oil storage – ParlyReportSA
Fuel price controlled by seasonal US supply – ParlyReportSA
PetroSA has high hopes with the Chinese – ParlyReportSA
SA aware of over-dependence on Middle East, says DOE – ParlyReportSA

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Minister Joemat-Pettersson clams up on nuclear

Nuclear deals cannot be transparent

(published to clients 25 Sept)

In a meeting to explain intergovernmental agreements so far made by South Africa on the nuclear New tina-joemattBuild programme, Department of Energy DOE and DDG of Nuclear, Zizamele Mbambo, was completely overshadowed by the requests by Minister of Energy, Tina Joemat-Pettersson, to preface the entire presentation with her own comments. She also was to speak first in answer to the many direct and pertinent questions from Opposition MPs directed at DOE.

In both cases it became less and less clear how much the nuclear programme was going to cost the country.  Also it became unclear what stage the Cabinet had reached as far as decision making was concerned, causing the chairperson of the committee, Fikile Majola (ANC), to remind the Minister that Parliament was supposed to provide oversight on financial commitments to other countries and certainly must be consulted before any such agreements were signed.

Russia dominating events

p van dalenIn an acrimonious exchange between P Van Dalen (DA) in summarising the areas of co-operation between South Africa and the Russian Federation, France, China, South Korea and the USA, Van Dalen remarked to the Minister that the whole picture looked like “Russia versus the Rest”. He wanted to know why the Russian co-operation areas were more informed and more extensive. He gave the example of the Russian agreement offered naming the actual location sites in South Africa for three possible structures.

Minister Joemat-Pettersson responded that the “areas of co-operation still had to be finalised” with Japan, to which country she had yet to visit, and Canada. The Russian Federation had done a particularly good job, she noted. Little information was given for Chinese involvement, it being assumed that President Jacob Zuma’s visit to that country would result in an update. Media reports state that Japan is teaming with Westinghouse.

 Just to keep some happy

 The Minister complained that Opposition members were making the Ministry’s life untenable by constantly demanding information on the extent, the cost and the timing of the New Build nuclear programme when too much information given out would compromise the bidding process. She denied there was any preferred bidder in the process.

She said DOE was supplying information to the meeting, “going as far as they could without compromising the whole exercise” because the Opposition parties had been very demanding. But it was still too early to make all documents available.

No sense

Gordon McKay demanded to know how it was then that Minister of Finance Nene had, in a mediagordon mackay DA briefing recently, stated that the “country could not afford a nuclear build programme” and how it was to be paid for?      If nobody knew the cost, what was Minister Nene talking about, he asked.   He said that Parliament was having “to rely on second hand information from the media” and this was wrong because it represented non-disclosure.

He also wanted to know who it was in South Africa that was “qualified enough to make a judgment call on both selection of the of the winning bidder and also be satisfied on the cost to the taxpayer.”

It was at this point that a surprising fact emerged.     Despite the Minister’s stated inability to answer on total project costs, it was admitted by her that an “independent consultant” had not only completed and supplied a project modelling report but a financial model as well.

All will be revealed

koebergNo further information could be supplied, the Minister said, either on who this was and estimated costs but she promised that the Committee would be briefed once the vendor bidding process was complete. A date at the end of 2015 was promised for further information to be supplied to Parliament on costs, plus the independent modelling reports “in due course”.

The Minister stated that again and again that “transparency was her target as far as Parliament was concerned” but said that she was constrained by the nature of the bidding at this stage. She however confirmed that a nuclear contribution “probably greater than originally expected” had to be part of the energy mix if South Africa was to meet its COP 15 environmental targets agreed to internationally.

DOE has a schedule

Z MbamboDDG of DOE, Nuclear, Zizamele Mbambo in his presentation, confirmed to Parliamentarians that the department was at the stage of the completion of pre-procurement processes and that commencement of procurement would start in the second quarter of 2016, with finalisation of partners by the end of the calendar year.

The intergovernmental agreements at present being concluded were displayed and covered the technology to be selected and construction: research reactor technology and construction; financing and commercial matters; manufacturing, industrialisation and localisation; human resources and skills development; public awareness programmes; safety liability and licensing; nuclear siting and permitting; the nature of both front and back ends of the fuel cycle itself and non-proliferation matters.

 Waste disposal issues

Opposition members wanted to know why waste disposal was not raised as a requirement and DDG Mbambo explained that South Africa had already enacted legislation to adequately cater for this issue and was deeply involved in waste disposal, quoting the Koeberg model.
However, it was notable that France and the USA contained “waste management areas of co-operation” in this regard, whereas the Russian contribution referred to enhancing support for the current legislative and regulatory environment, once again indicating a clearer knowledge of local conditions.

The DOE presentation went no further than just enumerating on a comparative basis each bidder’sbrics partners technological and commercial contributions in broad terms. However, it was notable that the Russian proposals went further than others on the degrees of localisation in the form of manufacture of components and skills training. It also included the “joint marketing and promotion of produced products to third country markets.” A considerable number of South Africans were already in Russian training exercises as they were in China.

Uranium in Karoo

The South Korean proposals were noticeably different in the area of contributing towards desalination of salt water projects and support in various aspects of nuclear research and the exploration and mining of uranium. At this stage the Chines contributions were limited for reasons stated but, again, noticeable in China’s paper was the expression “the development of new technology for civil nuclear energy for the (SA new) build programme and Republic of China and other third world countries.”
Other articles in this category or as background
Nuclear partner details awaited – ParlyReportSA
Nuclear and gas workshop meeting – ParlyReportSA
Nuclear goes ahead: maybe “strategic partner” – ParlyReportSA
National nuclear control centre now in place – ParlyReportSA

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SA’s economic woes not BEE, says DTI

BEE and economic climate not connected…..

lionel october 3In his introduction to the Department of Trade and Industry (DTI) presentation to Parliament on the current position with regard to the implementation of Black Economic Empowerment (BEE) as of August, 2015,  DTI’s DG, Lionel October, said that contrary to some claims, BEE was nothing to do with the many economic problems that beset South Africa.
In his overview, before discussing the detail of the B-BBEE Act, the Codes and Sector Charters, October said he wanted place the need for urgent transformation in its proper context. He said that indeed South Africa, as an emerging economy, had been hurt by global factors recently by Chinese currency interventions and originally by its own energy supply problems.

Key to future, says DTI

However, he said, economic transformation in the form of black advancement, procurement from black entrepreneurs, the transfer of basic mineral wealth into beneficiated products and a rebuilt and transformed manufacturing sector held the key to development.   BEE was nothing to do with the pervading “doom and gloom” scenarios that were persisting in business and industry circles.

Lionel October said “things now needed to be speeded up”. He claimed that the country now had all the legislation, tools and direction needed to contribute the shortage of jobs and quoted JP Landman by saying that South Africa faced a further problem that population growth of 200,000 births a year more than the previous year every year was as much a problem currently, he said.

The big sell

In tracing the development of BEE since the commencement of the B-BBEE Amendment Act in 2014, the adoption of the B-BBEE Codes of Good Practice in May this year, DTI had held 46 workshops to explain and help in the development and understanding of the need for black empowerment. It was not a racial issue, he insisted, but a programme of necessity if South Africa was to survive economically.

He said that the process of establishing at BEE Commission was at “an advanced stage” – the new acting commissioner having been announced recently.

B-BBEE ACT trumps all

Acting chief director of BEE at DTI, Liso Steto, then reported that the new “trumping” provision in the Broad-Based Black Economic Empowerment Act will take effect in two months time when the 12-month transitional period expires. An example of “trumping”, he explained to MPs, was if, for example, a government department put out for tenders and ignored the provisions of the B-BBEE Act. In that case, the Act would “trump” any regarding the tenders.
This trumping therefore, he said, will take precedence over any other law and relates to all other instruments of black economic empowerment, such as Codes of Good Practice and Sectoral Charters. The provision would come into effect in October 2015, by regulation.

Codes get to nitty gritty

On Codes, Steto said, the major development had been the issue of relating “employment equity” to “management control”, with the latter now being the uniform name. Also “preferential procurement” and “enterprise development” were merged for evaluation into one element re-named “enterprise and supplier development”.

Minimum requirements had been introduced for “ownership”, “skills development” and “enterprise and supplier development”, as above.

Fighting “fronting”

Acting DG Steto re-confirmed that 25.1% remained as the target for black ownership. Emphasis was laid on the expression “true ownership” when explaining the 40% sub-minimum applicable on the net value of ownership in the hands of black people. Only investments regulated and based in South Africa will qualify as a “mandated investment”.

On Sector Codes, it was confirmed that ten sectors had been given extensions since 2013 but the final, final date was now October 2015 for all sectors. To date tourism, property, agriBEE, forestry, the media, advertising and communication were in line for approval. The process of aligning the mining charter with the liquid fuel charter had begun.

Split must come

Rumour has it “in the corridor” that these will eventually be split but the whole issue of the implementation of the Minerals and Petroleum Resources Development amendments have to be resolved before such an event can even be considered, resulting in this be an issue way into the future.
Questioning from MPs was limited, a concern being expressed by parliamentarians that the whole issue of verification agencies had to be speeded up by DTI and re-clarified. Lionel October said this was a priority.
MPs also complained that the threshold increase for BEE exempt micro enterprises, now being introduced, from R5m to R10m seemed a strange move if the idea was to develop more small manufacturing businesses but DTI responded that their view was different and the necessity to reduce red tape in the SMME world was essential.

Other articles in this category or as background
25.1% is maximum BEE control, says DTI – ParlyReportSA
DTI does flip flop on B-BBEE codes – ParlyReportSA
Equity quotas court ruling affects BEE legislation – ParlyReportSA
B-BBEE Codes of Good Practice far more onerous – ParlyReportSA
One year to implement B-BBEE Codes – ParlyReportSA
Liquid fuels industry short on BEE charter – ParlyReportSA

Posted in BEE, Finance, economic, Fuel,oil,renewables, LinkedIn, Special Recent Posts, Trade & Industry0 Comments

Treasury’s plan for carbon tax

Morden’s thinking on carbon tax….

cecil mordenBearing in mind Cabinet has not agreed to a carbon tax at this stage, Cecil Morden, National Treasury, explained to the portfolio committee on environmental affairs that the carbon tax as currently proposed could reduce South Africa’s GHG emissions by between 35% and 45% by 2035.

It had to be noted, he said, that SA was in the top 20 in absolute global emissions.

Looking back, Cecil Morden said carbon tax policy proposals began with the Environmental Fiscal Reform Policy Paper in 2006, a Carbon Tax Discussion Paper in 2010 followed by a Carbon Tax Policy Paper 2013, a Carbon Offsets Paper in 2014 and now the current legislative drafting process.

The anticipated carbon tax implementation date, Cecil Morden said, was still mid-2016.

Balancing the books as well

The problem now was with South Africa joining with others COP15 in 2009 with a commitment to curbemissionsgraphic GHG emissions by 34% by 2020 and by 42% by 2025, the question was now of how to reduce the need for higher levels of growth and the energy and carbon intensive nature of the SA economy against the world commitment to reduce GHG emissions.

Cecil Morden told parliamentarians that there was always a concern that climate change could slow or possibly even reserve progress on poverty eradication based on the fact that most developing countries were more dependent on agriculture and other climate-sensitive natural resources for income and quality of life.

In addition, developing countries usually lacked sufficient financial and technical capacities to manage climate change, particularly in Africa and South Asia. Both of these continents seeing more substantial increases in poverty relative to a baseline without climate change, yet the cost of which would still fall disproportionately on the poor.

Done by offsets

carbontax1The rationale behind carbon tax was a means, Cecil Morden said, by which government can intervene by attempting to level the playing field between carbon intensive, fossil fuel based firms and low carbon emitting sectors using renewable energy and energy efficient technologies using a carbon offsets scheme.

In referring to the several carbon tax modelling schemes that had been produced and results of studies, the model proposed could reduce GHG emissions by between 35% and 45% by 2035, the study to be made public by the end of July 2015.

The major concerns at the moment and noted by Treasury were the impact of higher electricity prices on low income households and on the international competitiveness of exports in the world market.

Killing the cat

“The choice”, Morden noted, “had been between command and control measures, in other words byemissions regulation or by market based instruments. In other words by regulations that used legislation or administrative measures that proscribed certain outcomes usually targeting outputs or quantitative factors such as minimum ambient air quality measurements.

The second option of policy instruments that attempt to internalise environmental externalities through the market by altering relative prices that consumers and firms face.”

“Although this second option”, Morden said, “ does not set a fixed quantitative limit to carbon emission over the short term, a carbon tax at the appropriate level and phased in over time to the correct level will provide a strong price signal to both producers and consumers to change their behaviour over the medium to long term.”

He concluded that an introduction of a carbon price will change relative prices of goods and services, making emission intensive goods more expensive relative to those that are less emission intensive”.

Behavioural changes

Africa MoneyCecil Morden said that Treasury saw this as a powerful incentive for consumers and businesses to adjust their behaviour, resulting in a reduction of emissions.

MPs expressed concern that carbon offsets could be manipulated so they had to be related to actual reductions of emissions on paper, Morden replying that in terms of off-sets, there were going to be “quite rigorous requirements for how it should be monitored and Treasury would work closely with the DEA and DoE in this regard.”

Carbon thresholds the hope

In the discussions that followed Cecil Morden further noted that a carbon budget system was an evolving mechanism using information from companies to inform the budget. After a number of years, he said, the relative thresholds could be captured into absolute thresholds. The other possibility was to move towards an emission trading scheme and use the carbon budget just as an indicative monitoring tool, rather than as an instrument of penalty.

He then explained the use of border tax adjustments to try to level the playing field on imports. What ever happened, however, he promised, the entire matter would come before Parliament before South Africa participated in COP21.

Other articles in this category or as background
Carbon Tax under attack from Eskom, Sasol, EIUG – ParlyReportSA
Treasury sticks to its guns on carbon tax – ParlyReportSA
Minister Gigaba to line up Eskom for carbon tax – ParlyReportSA
Carbon tax not popularly received by Parliament – ParlyReportSA
Gordhan gives out strong message on carbon tax – ParlyReportSA
WWF warns that carbon tax must come to SA – ParlyReportSA

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Nuclear partner details awaited

DoE gives update on SA nuclear plan….

russian nuclearThe Department of Energy (DoE) says it is the sole procurer in any nuclear programme and that “vendor parades” had been conducted with eights countries, the results to be announced before the end of 2015. To give cost details, they said, would “undermine the bidding process”.

The situation regarding South Africa’s current intended nuclear energy programme was explained during a parliamentary meeting of the Portfolio Committee on Energy, DoE confirming that a stage had been reached where nuclear vendors had been approached and DoE staff were being trained in Russia and China.

Eskom not involved

Neither DoE, nor the Minister of Energy, Tina Joemat-Pettersson, who was also present would givetina-joematt cost estimates nor speak to the subject of financing other than the fact the minister admitted that the idea of Eskom being involved in the building programme in the style of Medupi and Kusile was a non-starter.

At the same time Minister Joemat-Pettersson announced that a new Bill, the Energy Regulator Amendment Bill, was to be tabled that would give Eskom the right to appeal against tariffs set by the National Energy Regulator (NERSA). This followed upon the news that Eskom would be given powers to procure, which must lead to the assumption, said opposition MPs later, that Eskom will recoup costs of financing through electricity tariffs.

The Minister said the renewable IPP programme involving the private sector had included multinationals and had been “hailed as a success” and the deal that would be struck with nuclear vendors would be on best price in terms of the end price for the consumer. Any bidding would be conducted in the “style of the IPP process”, which included support of the process of black procurement and skills training.

Contribution to grid still “theoretical”

modern nuclear 2Deputy Director, Nuclear, DoE, Zizamele Mbambo, explained to opposition members that whilst government had in principle decided to include nuclear energy in the energy mix for the future, DoE itself was still only at the stage of establishing all costs involved to the point of actual connection of a theorised figure of nearly 10GW to the national grid. To disclose costs at this stage would undermine the bidding process, he said.

The main purpose of the costing exercise still remained the final cost the consumer, he said, in terms of the NDP Plan 2030, a phased decision-making approach over a period of assessment having been endorsed by the Cabinet in 2012. The whole exercise of deciding what the costs would be was therefore relevant to how much coal sourced power would contribute to the baseload of the energy mix by 2030.

Deal or no deal

Zizamele Mbambo confirmed that in 2013, DoE had been designated as the sole procurer of the nuclearsmall nuclear reactor build programme and “vendor parades” had been conducted with Russia, China, France, China, USA, South Korea, Japan and Canada. The strategic partner to conduct the next stage, the New Build Programme itself, would be announced before the end of 2015, Mbambo said, by which time costs would have been established and treasury consulted.

At this stage no deal had been struck, he confirmed.

As distinct from the actual vendors per se, and any deals, Mbambo said that international agreements had been struck with interested counties on the exchange of nuclear knowledge, training and procurement generally.

DoE trainees already in China

chinese sa flags“Fifty trainees already employed in South Africa’s nuclear industry had already gone to China for ‘phase one’ training with openings for a further 250 to follow”, he said, noting that the Russian Federation had offered five masters degrees in nuclear technology.

The New Build nuclear programme was at present based on providing eventually 10GW of power to the grid but DoE confirmed that the indirect effect on the economy from “low cost, reliable baseload electricity is logically positive but difficult to assess”.

Zizamele Mbambo showed a graph of the possible integration of energy from coal, nuclear, hydro (imported), gas and renewables over a period, stating that nuclear was clean, reliable and would ensure security of supply with “dispatchable power.”

Opposition Members complained that the process seemed likely to make the price of electricity unaffordable to the poor and have a major impact on the cost of doing business in South Africa.

Nuclear vs. coal

Mbambo was at pains to explain that in the long term, the cost of nuclear energy was considerably lessgrids than coal and this was the reason that, for future generations, South Africa had to embark on a course that not only lead to cleaner but cheaper energy.

As a final issue, DDG Mbambo touched upon the question of approval by the International Atomic Energy Agency (IAEA) and explained that any relationship with this UN body was on the basis of a peer review.

This covered nineteen issues from nuclear safety management to radioactive waste disposal and was not an audit, he explained, South Africa already having been an experienced nation in nuclear matters from medical isotopes to nuclear weapons. It was pointed out to members that that IAEA merely carried out reviews and made input.

Up to speed or not

IAEAIt was during the response to the budget vote speech on the subject of the IAEA, that Opposition Shadow Energy Minister, Gordon Mackay said that the agency had found South Africa deficient in more than 40% of its assessment criteria.   In response, DDG Mbambo did not refer to the current state of the country’s nuclear readiness at any point but confirmed there was a great need for training and this was now the emphasis.

He said the relationship with the IAEA was in three phases covering purchasing, construction and operations and although it was thirty years since South Africa had a nuclear building programme at Koeberg, the current contribution to nuclear technology was recognised.    The programme now was to create a younger generation of nuclear experts, the main issue being to build technology capacity and train trainers in the state nuclear sector.

Reactor numbers

Mbambo concluded his presentation by stating that DoE was in discussion with treasury specifically on this issue of funding training, Minister Joemat-Pettersson adding that some six to eight reactors were planned  but a this was very early, the weight that “price” would carry in determining a strategic partner was not decided.

Other articles in this category or as background
Nuclear goes ahead: maybe “strategic partner” – ParlyReportSA
National nuclear control centre now in place – ParlyReportSA
Energy plan assumptions on nuclear build out in New Year – ParlyReport

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Chevron loses with Nersa on oil storage

 

Nersa appeal in favour of Burgan….

cape town harbourWhether Chevron would or would not close down its refinery in Cape Town was asked twice by MPs during a debate in the Portfolio Committee on Energy on the licence supplied by the National Energy Regulator (NERSA) for the construction of a new oil tank terminal to be constructed at Cape Town harbour.

The storage facility, comprising twelve tanks with loading facilities, is to be constructed next to the Eastern Mole berth by Burgan Cape Terminals, a subsidiary of international oil trading merchant Vitol in which local BEE companies, Thebe Investments and Jicaro Ltd., have a 30% stake.

Crompton says move “a ploy to ransom”

Dr Rod Crompton, NERSA’s Regulator, said he thought that such a move by Chevron as closing the rod cromptonrefinery was unlikely and the possibility, as stated by Chevron in their appeal, was just a ploy to “ransom” the government in denying Burgan the licence.”

There were some 13,000 jobs involved at Chevron and he said “I cannot see Chevron pulling out.”

Dr Crompton expanded on this by saying that Chevron’s objection had come at a particularly sensitive point in the oil industry’s history when possible government subsidies were being argued about, with refineries calling for help in a re-build programme to meet cleaner fuels specifications (CF2) in terms of international agreements signed by South Africa.

Dr Crompton said new vehicle engines were already being manufactured based in the new specifications and “the pressure was on”.

No pipeline from Cape Town

chevron CTHe said that Chevron had maintained in their appeal against the licence being granted to Burgan that they were situated in a province where production exceeded demand and Transnet had supplied no pipeline from Cape Town to the industrial heartland of South Africa.

This was in comparison to KzN, where the Transnet Durban/Gauteng pipeline ensured flow from Sapref (Shell and BP) processing some 24 000 tons crude per day and Enref (Engen) had a nameplate capacity of 135, 000 barrels per day, all of which was far in excess of the demands of their province.

Dr Crompton said that Chevron was asking for a dispensation which no other refiner enjoyed, whereas in fact in Durban the two refineries competed with each other.

Not impressed

Present  in the audience seating at the meeting were Nobuzwe Mbuyisa, Chairperson of Chevron and various other Chevron executives. They remained impassive throughout the NERSA presentation.

NERSA had noted, Dr Crompton said, that South Africa generally was in need of storage capacity and NERSA had only licensed in the Cape Town area three facilities for petrol and diesel and only one of these allocated any storage for third parties. A total national storage figure of 1.7% was only available in fact, he said, to third parties throughout the country.

Burgan says no supply security

NERSA said that on the question of loading facilities, Burgan had pointed out to NERSA that there waschevron tank no security of supply for the area, since Chevron owned the only facilities, although Chevron had argued, Dr Crompton said, that it had spare capacity. But this was not the case at all, he said.

Dr Crompton said NERSA had decided that in the light of the fact that a study had shown that South Africa’s refineries in general were ageing; that Chevron’s port infrastructure had constraints in the context of growth and there was limited access to third party storage, especially new BEE entrants and that that truck discharge rates were the key bottleneck and not as either party stated, that a licence for storage as well as discharge facilities should be granted to Burgan.

Why come to Parliament?

All MPs from both parties complained that whilst the dissertation had been interesting, as the decision had already been made by NERSA why they asked was the Committee’s time being wasted when the matter that was already a fact.  Dr Crompton replied that NERSA had been invited by Parliament to expand on the security of supply issue at the invitation of a Parliamentary Study Group on the subject.

gordon mackay DAGordon Mackay, Shadow Minister of Energy, said that security of supply was a matter for the Department of Energy not NERSA but he warned that Vito were large merchant traders and that the storage facilities were well off normal oil trading sea routes.

The oil game

The tanks, he warned, could very well be used by Burgan for dumping in a game of oil price manipulation, as Burgan were traders not refiners and product suppliers but time would tell.

Dr Crompton dismissed such a suggestion out of hand.

Other articles in this category or as background
South Africa still off the hook on Iranian oil
Fuel price controlled by seasonal US supply – ParlyReportSA
CEF hurt by Mossel Bay losses – ParlyReportSA

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MPs attack DPE on energy communications

DPE has a tough time on energy issues…

business-communicationsPoor communications with the public on the energy crisis and the limited ability of the ministries involved to communicate with state owned companies (SOCs) were issues raised during a report on SOCs falling under control of the department of public enterprises (DPE) during a meeting of the relevant portfolio committee.

The meeting was called to respond to the AG’s report on the performance targets of the DPE.

One opposition member complained that all bonuses paid to Eskom executives should be keyed to whether the lights stayed on or not. Despite there being six state utilities being reported on, it was questions on Eskom that occupied most of question time.

AG report about targets only

AGSA logoWaleed Omar, audit manager, auditor general’s office (AGSA), indicated to Parliament that no significant findings representing failings on issue targets were identified in their review of the DPE annual performance plan for the 2015/16 financial year.

It was explained by Sybrand Struwig, manager of AGSA, that any annual audit of actual performance period was prepared against pre-determined objectives, coupled with indicators and targets as contained in the annual performance report of a department.  Such confirmed compliance with laws and regulations.

The usefulness of this performance information against targets and the reliability of performance reporting enabled AGSA to compile an audit of a department or SOC to reflect an opinion or conclusion on performance against predetermined objectives and how risk had been managed.

DPE met standards set

Ms Matsietsi Mokholo, DPE acting DG, expanded on this by saying what in fact AGSA was saying to parliamentarians was that the exercise had been to assess DPE’s compliance according to AGSA’s matrix; how it aligned with the National Development Plan (NDP); and how issues were dealt with in terms of the medium strategic frameworks report (MTFs) made regularly to Parliament over the given period 2014 -2019.

She said the auditor general had confirmed that DPE was on track with regards to this alignment.  Indeed, she said, DPE had identified its key challenges and the risks which “could materialize” if measures within state owned entities under their control were not taken.

Eskom the only real SOE problem

In answer to MPs questions on Eskom, Ms Mokholo said that DPE has identified that the tense situation of load shedding needed to be carefully managed and monitored in order to avoid a blackout.   Currently the country has moved towards stage three of load shedding in order to avoid a blackout.

The issue was the only matter in the DPE portfolio of state owned companies (SOCs) that had major problems; otherwise DPE had a good record. However, she said, there were questions still being asked about how Eskom would prevent stage four which would apply in the case of a total blackout. This issue was now being addressed in its strategy plan and, consequently, the AG was satisfied that issues had been addressed not ignored. That was what the report was all about.

Medupi on or off

Other issues addressed were the unrest at the partly constructed Medupi power plant, which was difficult because the workers involved were not public servants, but the matter had been addressed and a resolution hoped for.   Another issue covered was a strategy to how further avert any downgrading of Eskom from a shareholder perspective, again most difficult because much was outside of DPE’s control.

DPE’s control over SOEs limited

Other matters being discussed were the whole issue of the reliance of SOCs on government guarantees and the reliance SOCs on road transportation.   It emerged during the discussion how little DPE could intervene in SOC management and parliamentarians said that thought should be given to this as the success of an SOC was imbedded in a minister’s performance agreement.

Ms Mokholo concluded that DPE currently was responsible for six SOCs. She said, “The challenges currently faced by Eskom should not be seen as a reflection on the performance of the entire portfolio. Eskom was the only SOC which was facing serious challenges”.

She repeated the fact that the others were doing well. AGSA confirmed that the corporate plan of any SOC was audited consistently throughout the portfolio of DPE’s SOCs and, as was reported in October 2014, the current portfolio at that time, with the exclusion of SA Express, did not have any material findings that worried AGSA.

Financials to come at end of year

Waleed Omar, audit manager, explained that AGSA did not wait until the end of a financial year to audit a department or entity’s financial plans. Financial audits were a completely separate issue. AGSA would provide input before the end of the financial year.

In this case, internal auditors of each SOC looked at the reliability of the information reported and whether the quarterly results were supported by the matching documents. AGSA would then rely on the work of internal audits. He said there have not been any instances at this stage within DPE at this stage showed any material differences between the findings of internal audits and those of AGSA.

Mr Omar explained that AGSA has considered the work of internal audits for the first two quarters of the financial year for 2014/15. AGSA followed a process according to international standards but this particular meeting showed that DPE’s operational plans were compliant.

DPE admits private sectors skills needed

When the committee started to discuss the gradual development of DPE into commercial sectors, Mr Ratha Ramatlhape, DPE director, added that many of the new strategies being triggered in the core entities of energy, manufacturing and transport would require bringing in technical experts from the outside to deal with the challenges being faced within the DPE portfolio.

Ms N Mazonne (DA) raised the fact that Eskom had paid bonuses to executives, none of which had achieved 100% of their key performance indicators (KPIs) which were therefore far too easy to reach.  DPE needed to tell Eskom, she demanded, that executive KPIs had to be aligned to whether the lights were kept on or not.

This indicated, the DA said, what the minister of public enterprises had been telling Parliament for some time to the effect that the level to which the DPE could intervene with SOCs was far too limited.   DPE could only play an advisory role it seemed, Mazonne said, and there needed to be legislation in place urgently to resolve this.

Legislation expected on minister’s powers

Ms Mokholo responded that DPE has already started working on giving ministers the power to intervene based on the Companies Act.  For example, she said, the DPE had a meeting with the Eskom board to deal with interventions which were not necessarily based on legal prescripts, an example being the co-generation contracts. She confirmed legislation was being looked at.

Opposition members were of one voice that although it was unfair to blame DPE for the electricity crisis, nevertheless, with the country at stage three of load shedding, there was no way DPE could deny that the economy and people’s lives were being badly affected. Current communication with Eskom was very poor, they said, and a national broadcast was needed to allay the air of panic that existed in some quarters of the economy.

The DPE responded that it had advised the Minister and the war room to release such a statement or the President to make a statement in his budget vote speech.

Other articles in this category or as background

Public enterprises reports on controversial year – ParlyReport

South Africa remains without rail plan – ParlyReport

SA Energy gets war room status – ParlyReportSA

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Budget vote speeches: Out of touch with each other

Editorial….

DTI does flip flop on B-BBEE pointing…..

elephant and bayThere have clearly been were two big elephants in the room during budget vote speech time in the National Assembly over the last two weeks – Eskom and BEE.    Then, suddenly, with DTI reversing their decision to reduce B-BEE pointing award benefits for broad-based employment schemes – one of the elephants disappeared.  It was an amazing flip flop in government policy.

But in actual fact this represents no change, in reality – just simply the fact that the whole structure of what was proposed was seen by all as impractical, unenforceable and to industry, unacceptable.

Backstage dramas

Whether it was business and industry pressure that forced the change, the Chamber of Mines or even the trade union movement itself, after two surprising gazettes announcing reduced awards in terms of black empowerment for broad based shareholder schemes, including employee schemes so carefully Rob+Daviesworked out in the last two years, and the second gazette correcting the fact that such changes were not retrospective, what happened behind the scenes will never be known. We think it was minister Rob Davies himself who put his foot down.

In a private comment, when sympathising with the minister for having to reverse his department’s announcements so publicly, his answer was “When something goes wrong you have to put it right.”  We admire for that and told him so.

Energy issues remain at the core

As far as the first elephant in the room, the energy crisis, it remains.    Unusually, this year despite all the speeches, the amount of media briefings and portfolio committee debates, including the millions of rands spent on airfares with some forty odd departments and SOEs fielding full teams reporting, it was only the minister of energy, Tina Joemat-Pettersson, who really tackled electricity and the issue of Eskom – all the other ministers appearing avoiding the issue like the plague, even public enterprises.

Correcting the past

What indeed was noticeable, at portfolio committee level as well, that each reporting team and each minister seemed to be more anxious to report on transformation and state ownership issues, as if some very clear dictate had been received that the ANC was not delivering on its election mandate in these areas and this was really the main priority.

Whilst lip service seems to have been paid, and then only in some instances, to the need for foreign investment and issues of the country’s rating image, the lacklustre address by the minister of trade and industry gave only more credence to the belief that redress for past injustices was the only big elephant in their lives and in Union Buildings.

Transformation not economics at forefront

In the committees, where all departments have been reporting on progress towards annual targets, this now being the last quarter, the most important slide in any PowerPoint presentation (following clarity on the audit process) was always the racial makeup of the department concerned in terms of reaching transformation targets and what race ratios currently existed. The theme was obvious.

We have listened to many thousands of words spoken over the month and more is yet to come as we write, but it is all too evident that there is a massive discord between business and industry and President Zuma’s cabinet on priorities.

Final word

Trade and industry minister, Rob Davies, warned parliamentarians in his budget vote speech, when mentioning BEE matters , that members should  be aware that the President had indicated that the central task was to bring about radical economic transformation.      Which really said it all.

Posted in BEE, cabinet, Cabinet,Presidential, earlier editorials, Finance, economic, Fuel,oil,renewables, Trade & Industry0 Comments

Fuel price controlled by seasonal US supply

US refinery shut downs affect fuel price…..

US refineryThe current spike in the price of petrol is due of a number of international issues  compounding together but the primary cause is that at this time of year in the United States, a number of major US refineries close down for maintenance in order to prepare for the US summer surge in fuel sales.

This was said by Dr Wolsey Barnard, acting DG of the department of energy (DoE), when he introduced a briefing to the portfolio committee on energy on its strategy for the coming year.

In actual fact, the meeting had been called to debate the promised “5-point energy plan” from the cabinet’s “war room” which did not eventualise, the minister of energy also being absent for the presentation as scheduled. It appeared that the DoE presentation had been hastily put together.

“Price swingers” make perfect storm

Dr Wolsey BarnardDr Barnard said that it could be expected that the price of fuel would be extremely volatile in the coming months due in main “geo-political events” affecting the price of oil, local pricing issues of fuel products and possibly even sea lane interruptions. Price would always be based on import parity and current events in Mexico, Venezuela and the Middle East would always be “price swingers”, he said.

On electricity matters, his speciality, he avoided any reference to past lack of investment in infrastructure, but said that he called for caution in the media, by government officials and the committee on the use of the two expressions “blackouts” and “load shedding”.

Same old story

“Over the next two years”, he said, “until sufficient infrastructure was in place, there would have to be planned maintenance in South Africa” and referred to the situation in the US as far as maintenance of refinery plant was concerned. He said that also “unexpected isolated problems” could also arise with ageing generation installations, during which planned “load shedding” would have to take place.

He said he could not imagine there being a “blackout”.

Opposition members complained that the whole electricity crisis could be solved if some companies would cease importing raw minerals, using South African electricity at discounted prices well below the general consuming manufacturing industry paid, and re-exporting smelted aluminium back to the same customer. They accused DoE of trying to “normalise what was a totally abnormal position for a country to be in.”

Billiton back in contention

One MP said, “Industry was in some cases just using cheap South African electricity to make a profit”. Suchaluminium smelter practices went against South Africa’s own beneficiation programme, he said, in the light of the raw material being imported and the finished product re-exported. “It would be cheaper to shut down company and pay the fines”, the DA opposition member added, naming BH Billiton as the offender in his view.

Dr Barnard said DoE could not discuss Eskom’s special pricing agreements which were outside DoE’s control  and “which were a thing of the past and a matter which we seem to be stuck with for the moment.”

High solar installation costs

Dr Barnard also said that DoE had established that the department had to be “cautious on the implementation of solar energy plan” as a substitute energy resource in poorer, rural areas and even some of the lower income municipal areas.  DoE, he said, “had to find a different funding model”, since the cost of installation and maintenance were beyond the purse of most low income groups.

In general, he promised more financial oversight on DoE state owned enterprises and better communications.   There were plenty of good news stories, he said, but South Africa was hypnotising itself into a position of “bad news” on so many issues, including energy matters. He refused to discuss any matters regarding PetroSA, saying this was not the correct forum nor was it on the agenda.

Still out there checking

On petroleum and products regulation, the DG of that department, Tseliso Maquebela, said that non-compliance in the sale of products still remained a major issue. “We have detected a few cases of fraudulent fuel mixes”, he said, “but we plan to double up on inspectors in the coming months, especially in the rural areas, putting pressure on those who exploit the consumer.” The objective, he said was reach a target of a 90% crackdown on such cases with enforcement notices.

Maquebela added that on BEE factors, 40% of licence applications with that had 50% BEE compliance was now the target.

Competition would be good

On local fuel pricing regulations, Maquebela said “he would dearly like to move towards a more open and competitive pricing policy introducing more competition and less regulations.”

fuel tanker engenOn complaints that the new fuel pipeline between Gauteng and Durban was still not in full production after much waiting, Maquebela said the pipeline was operating well but it was taking longer than expected to bring about the complicated issue of pumping through so many different types of fuel down through the same pipeline. “But we are experts at it and it will happen”, he said.

Fracking hits the paper work

On gas, particularly fracking, DoE said that the regulations “were going to take some time in view of all the stakeholder issues”.

On clean energy and “renewables” from IPP sources, DoE stated that the “REIPP” was still “on track” but an announcement was awaited from the minister who presumably was consulting with other cabinet portfolios regarding implementation of the fourth round of applications from independent producers.

Opposition totally unimpressed

In conclusion, DA member and shadow minister of energy, Gordon McKay, said that the DoEgordon mackay DA presentation was the most “underwhelming” he had ever listened to on energy.   Even the ANC chair, Fikile Majola, sided with the opposition and said that DoE  “can do better than this.”

He asked how Parliament could possibly exercise oversight with this paucity of information.   DoE representatives looked uncomfortable during most of the presentations and under questioning it was quite clear that communications between cabinet and the DoE were poor.

When asked by members who the new director general of the department of energy would be and why was the minister taking so long to make any announcement on this, Dr Wolsey Barnard, as acting DG, evaded the question by answering that “all would be answered in good time”.

Other articles in this category or as background
Energy gets war room status – ParlyReportSA
Medupi is key to short term energy crisis – ParlyReportSA
Integrated energy plan (IEP) around the corner – ParlyReportSAenergy legislation is lined up for two years – ParlyReportSA

Posted in Electricity, Energy, Enviro,Water, Facebook and Twitter, Fuel,oil,renewables, LinkedIn, Mining, beneficiation, Public utilities, Special Recent Posts, Trade & Industry, Transport0 Comments

Eskom goes to the brink with energy

Editorial…..

What war room?….

black bulbFor those who have been associated with a war, they will know that a war room is a pretty busy place. However, one gets the impression that the South African war room, mandated to sort out Eskom and energy planning, has no red telephone and little understanding of working overtime in a time of crisis.

Spokesperson, Mac Maharaj or his  replacement, has certainly issued no statements headed with such a title, the President being busy visiting Egypt, Algeria and Angola with the deputy president calling in on the Kingdom of Lesotho.  President Mugabe has come and gone, more presidential visits are planned…… and the World Bank report on South Africa has been published.

Teetering on the edge

Meanwhile, the Eskom issue is still boiling over, the question of the fourth round of IPP tenders and more to come has been announced by the minister of energy but little evidence exists that a war room exists, let alone a high powered advisory council to advise the war room.  Parliament was, of course, on Easter recess which added to the uncanny political silence on urgent matters, particularly the energy issue, although the story at Medupi with a return to work and the appointment of a new CEO at Eskom seems  calming.

At last public servants are re-appearing from extended Easter holidays but the so-called war room gives the impression of having bunkered down. Hopefully the report in the coming weeks on Eskom, as South Africa tackles some of the other serious matters facing the country, will not only show with what went wrong but what the war room intends to do about it.

Perhaps a picture of the war room sitting and debating might actually help us believe there is one.

Posted in cabinet, earlier editorials, Electricity, Energy, Facebook and Twitter, Finance, economic, Fuel,oil,renewables, LinkedIn0 Comments

Zuma goes for traditional support with expropriation

Editorial….

Session ahead may bring clarity on expropriation…….

NAIt is a difficult time for business and industry to establish exactly where they are in terms of the legislative environment in South Africa, land expropriation and state or BEE participation being mainly the issues.  However, the cabinet must be aware of the need expressed in many circles for more certainty in terms of the investment climate.

The Bills held back by the Presidency for re-consideration or signature are re-emerging slowly back into the public sphere.   Aside from the highly controversial Traditional Courts Bill adding power to the arm of President Zuma’s supporters in rural  leadership roles but offending women’s rights groups, now re-tabled in Parliament in a different form, as a section 76 Bill, is the Expropriation Bill.

Being a 76 section Bill means that the proposed changes and the formation of a state valuator’s office as thezuma traditional final arbiter on land restitution will have to be debated in all nine provincial legislatures and a mandate provided to the National Council of Provinces to gain concurrence with any vote on the Bill taken in the National Assembly. 

It is interesting to note that some time ago, President Zuma let it be known that he would also like to see this Bill considered by the House of Traditional Leaders. This is probably in the light of the debate now emerging that traditional chiefs were not consulted properly, if at all, in terms of the Restitution of Land Rights amendments.

Serving notice

Crucially, the Expropriation Bill still seeks to allow any ‘expropriating authority’ to take property by serving a notice of expropriation on the owner stipulating the value the state will pay, presumably according to the state valuation if there has been an appeal.

Commentators have noted that the new Bill differs in that the state may then serve a further notice of expropriation, which could be less, more or not necessarily revised at all, and the owner will be deemed to have accepted that transfer of land to the state unless the owner commences litigation within 60 days.

The short amount of time to respond and appoint and brief counsel and the fact that litigation, a highly costly process (costs being to the owner not the state), will no doubt be an issue debated extensively in Parliament. At this moment the main opposition party has been caucusing on the Bill. The fact that the Bill will now have to be debated in all nine provinces will leave a fluid situation for some time yet.

Struggling to produce

The Protection of Investment Bill remains an unknown quantity. Speaking to the DTI legal advisor, all he could say was “We are struggling with it”. 

Similarly, no tabling notice has been published with regard to the Private Security Industry Bill.

No energy  outcome

At the time of writing the “Five Point Energy Plan”, promised by the cabinet “war room”, has also not been presented to Parliament, the minister of energy advising all that it was necessary to have first a trip to the DRC and discuss the Grand Inga Hydro project.

Instead of her unadvised non-appearance in Parliament, a presentation by the department of energy took place, monitored in this report. What did emerge however was that future regarding the intended energy mix is also very fluid, there clearly being a division of interest in what is necessary to bring about in the short term better service delivery to the poor and in the longer term the needs of investors.

Traditional support

Time and time again, since his state address to the nation, President Zuma, where land matters are concerned, has made reference to the Council of Traditional Leaders, the majority party having no doubt realised that this base of power can either be pacified or radicalised – a very sensitive area and where the least service delivery by government occurs.

In his speech opening the National House of Traditional Leaders, he encouraged traditional leaders to take advantage of the 2013 Restitution of Land Rights Act as amended and rushed through at the end of the last Parliament and for them to put in claims.

The amendment Bill passed reopened the window for lodging restitution claims, but retains the restriction that dispossession must have taken place after 1913. The hints by the President in subsequent days in further briefings that the date of 1913 “is negotiable” have led to further claims being notified some of them apparently going back many hundreds of years. 

Once again, this will only be finalised when parliamentary debate finally takes place as the issue is bound to be raised but the whole matters adds to current uncertainty.

Hole in the pocket

Meanwhile the budget for what can be paid out in the form of restitution has been decided by minister of finance Nene and was presented in the last budget to Parliament in the current session.

President Zuma’s reference in Parliament to land held by foreigners in the state of nation address produced an unfortunate atmosphere which was somewhat mollified by off-the-record remarks by ministers to the media but no legislative clarity for Parliament to consider has emerged.

Indeed, a difficult time for business and industry, not forgetting that the Eskom issue is about to be raised again in forthcoming portfolio committee meetings in the coming week, hopefully bringing some clarity to the issue of reliable electricity supply.

Editorial only

Posted in cabinet, Cabinet,Presidential, Electricity, Facebook and Twitter, Justice, constitutional, Land,Agriculture, LinkedIn, Trade & Industry0 Comments

Parliament circulates Russian technology agreement

 

Partnership in techno between SA and Russia…

russian flagThe agreement between the Republic of South Africa and the Russian Federation on scientific and technological cooperation has now been tabled in Parliament, according to a notice published recently. It includes an annex between the same parties, the point being made strongly that both Russia and South Africa are part of BRICS which includes Brazil, India and China and indicating similar agreements. After much to-ing and fro-ing in 2014 between Moscow and Pretoria by minister of energy Tina Joemat-Pettersson and a separate visit by President Zuma for personal reasons it seems but who met President Vladimir Putin, a Russian Federation delegation was reported as having visited Tuynhuis in the Parliamentary precinct in early December last year, meeting Speaker of the House, Baleka Mbete.

The “R” in BRICs

The actual agreement was signed by the chairperson of the National Council of Provinces, Thandi Modise, who appears to have hosted the event. It was also signed by the deputy chairperson of the council of the Federation of the Federal Assembly of the Russian Federation, Ilyas Magomed-Salamovich Umakhanov. In a statement issued at the time in Cape Town, it was announced that “the two Parliaments had agreed to strengthen ties and cooperation through exchange programmes and to encourage freer movement of people between the two countries.”

Not just science

Education, agriculture, economic cooperation and coordination in the global arena were also identified as key areas for closer cooperation. “This memorandum of understanding is testimony to the historical, present and future ties between our countries,” Ms Modise said.   With regard to the use of the word “historical”, President Zuma mentioned in his recent SONA address that the bodies of “two veterans of the apartheid struggle” were to be repatriated and re-buried in South Africa. The statement issued at the time by Ms Modise stated, “Members of Parliament should not be left behind in developments taking place at executive level between their countries.” Other articles in this category or as background Nuclear goes ahead: maybe “strategic partner” – ParlyReportSA Nuclear and gas workshop meeting – ParlyReportSA National nuclear control centre now in place – ParlyReportSA

Posted in Earlier Stories, Energy, Labour, LinkedIn, Public utilities, Trade & Industry0 Comments

MPRDA Bill to be amended urgently

Some form of compromise….

coal miningIn referring back to Parliament the Mineral and Petroleum Resources Development Amendment Bill (MPRDA) and acknowledging in his State of Nation Address (SONA) that in its present form it could be damaging to South Africa’s investment climate, President Zuma and his cabinet have introduced more certainty to both the mining and oil and gas industries.

At least a year and a half delay was a guess if the suggestion that two replacement Bills were to be drafted separating mineral resources from oil and gas in the light of the fact that both have separate BEE charters.

Certainty needed

However, mineral resources minister Ngoako Ramatlhodi has agreed with mining companies and also the point put forward by Chamber of Mines that the best and fastest way forward to bring certainty to theRoughnecks wrestle pipe on a True Company oil drilling rig outside Watford industry would be to pass the Bill subject to amendments based on a new approach to the mining beneficiation issue and the matter of state “free carry” in any successful gas exploration.

Originally, on an issue raised both in submissions and by opposition parties and, even a couple of ANC MPs, the presidency has also agreed to doubts expressed whether, once signed, the MPRD Act after amendment would pass constitutional muster on the basis of the amending Bill’s passage through Parliament and the process adopted.

Section 79(1) of the Constitution empowers the President to return a Bill to Parliament for reconsideration if reservations about the constitutionality of the Bill prevail.

Mining land

Subsequently pointed out as a further reason for the Bill not beingtrad leaders signed, raised in a presidency statment issued by spokeperson Mac Maharaj, was a concern of cabinet that the Bill had to be processed through the Council of Traditional Leaders.

Parliament passed the Bill all in a rush at the end of March 2014 after much lobbying by ANC whips and despite warnings and constitutional challenges from many parties.  Nearly a year has passed since sending the proposals off for presidential assent.

The subject of the regulatory environment has not even been touched upon or has come up in the debate at this stage.

During the parliamentary recess both the Chamber of Mines and others have complained of sustained uncertainty in their industries and in the investment world.

Two issues emerged almost immediately when the President announced he was delaying his signature. The first issue was a hefty warning from mineral resources minister Ngoako Ramatlhodi who said “the implications for companies that did not meet BEE targets set out in the mining charter would be severe”, inferring that this might eventually affect the granting of mining licences. He raised, once again, the issue of employee shareholding.

“Developmental” metals pricing

Consequently, it still remains somewhat foggy what government policy was in instituting such clauses other than an overall ambition for the state to have more ownership of strategic resources in both industries and the drive by minister of trade and industry, Dr Rob Davies, to assist smaller manufacturing metals industries becoming more viable at the cost of larger industries, therefore creating more jobs, he said.

On the subject of BEE and the two different charters affected, all that has been said officially was a remark by minister Ramatlhodi “We have to satisfy ourselves that the Act meets our broader socio-economic development activities.”

The second issue to emerge after the announcement of the return of the MPRDA to Parliament was further mention by the department of energy of“Operation Phakisa”, the speed-up process as part of a co-ordination exercise with the oil and gas industry to reduce reliance on oil imports.

Fracking and renewables

On a separate issue, further statements by ministers with regard to fracking and speeding of delays in the IPP world with renewables has also emerged, overshadowed by the urgent need of an energy plan from the newly formed energy “war room”.

Whatever happens, both industries should be prepared for another round of public comment, hopefully in the first parliamentary period after the Budget…… minister of finance Nene notably mentioning nothing of nuclear interest in his budget speech.
Other articles in this category or as background
Energy War Room formed to meet crisis – Parly ReportSA
Mineral and Petroleum Resources Bill halted perhaps – ParlyReportSA
Medupi is the key to short term energy crisis – ParlyReportSA

Posted in Energy, Facebook and Twitter, Finance, economic, Land,Agriculture, LinkedIn, Mining, beneficiation, Trade & Industry0 Comments

Grand Inga hydro power possible

DRC clean energy destined for SA….

drc flagOpposition members of the parliamentary energy committee expressed a certain level of cynicism regarding the Grand Inga project treaty signed recently between South Africa and the Democratic Republic of Congo (DRC), the subject of which is a multi-phased hydro power station to be built on the Congo River.

They noted that the DRC is ranked second only to Somalia as the worst country on a worldwide index of failed states    However, despite this reservation, MPs in general noted that on the whole the project had “exciting possibilities”, albeit long term ones.

These points were made during a presentation by the department of energy (DoE) on the Inga treaty recently signed by President Zuma.   Inga 1 and Inga 2 dams are already in operation, supplying low output power. The issue of a hydro power link with the DRC has been “on the table” for some fifteen years.

Congo River cusec power

The new third Inga dam, which will be by far the largest and hence the title “grand” for the whole project. The project will be approximately 250 kms from the capital Kinshasa and 50kms from Africa’s West coast, the Congo River having the second largest and strongest flow after the Amazon, mainly as a result of the dams being sited after one of the largest waterfalls in the world. However, the Congo has by no means the longest and largest drainage area.

DoE said in response to the statement that the DRC was a failed state that whilst it recognised that the DRC had been unstable for years, especially in the North Eastern Region, most of the trouble was more than 200km from the Inga site and even when the civil war at its height, there had never been any interruption of power services.

The Grand Inga project, said DOE in quoting the developers, would be able to supply some 40,000MW in clean energy when all seven phases were completed for development in Central, East and Southern Africa.

SA power line to local grid

It is foreseen that new transmission line to South Africa necessary will be associated with the first phase of the project and which would probably traverse Zambia, Zimbabwe and Botswana.   It is estimated that the first phase will cost some R140bn at current prices.

The meeting in question was attended by the deputy minister of energy, Thembisile Majola, and DoE represented by Ompi Aphane, DDG: policy, planning and clean energy, DoE, who indicated that the treaty provided for the establishment of an Inga Development Authority (ADEPI). There would also be a joint ministerial committee drawn from the two signatory countries and a joint and permanent technical committee to facilitate the project.

Earlier failures

The deputy minister said that the new treaty had at last put behind the failed Westcor project, involving Billiton and essentially a SADC body involving SA, Angola, Botswana, the Congo and Namibia with the DRC as lead.

In 2010, the DRC announced it was pulling out of the arrangement and would develop the Inga dam complex on its own, which move collapsed the Westcor consortium. However, despite much wasted time and effort, Aphane said a good deal of the feasibility work had been completed.

Minister Majola said that what had been learnt from Westcor was that any future proposition had to be on a win/win basis for each participant in order to avoid such a collapse.    It was now recognised that the DRC had to meet its own requirements first as a basis for any project to succeed as a consortium, the minister added.

Getting in first

An MOU with the DRC was subsequently signed on this basis in 2011 and the current treaty provides not only a potential to generate the stated 40 000 MW after its seven phases but to provide relatively cheap, clean energy at any point, of which RSA has secured rights to import 12 000MW.

Ompi Aphane explained that in return DRC have agreed to grant SA the right of first refusal (ROFR) for both equity and off-take in respect of any and all future phases of the project or any related hydro-electric development of the Congo River in and around the Inga complex.

Once RSA is “locked in” to phase one and proceeds with implementation, it is committed to take 2500 MW as an off take.

SA gets lowest terms

US$ 10m is payable by SA in terms of the treaty into an escrow account as commitment fee in terms of the ROFR.    Aphane said that SA will be charged the lowest possible tariff and no other off-taker will be able to receive better terms than SA.

He continued, “DRC are to ensure that for each phase of the project, the developer company will reserve at least 15 per cent of the available equity to SA and South African entities, public or private, and SA shall be the first to be offered such share capital.”

Aphane said the “designated delivery point” will be at Kolwezi, about 150 km from the DRC/Zambia border and SA will be responsible for the 150 km line needed.   The DRC will either provide a concession to enable SA to construct and operate that portion of the line to the Zambian border, or commit to develop it themselves.   One of the DRC’s most obvious priorities was the supply of power to Kinshasa and Zambia’s “copperbelt”.

Parliament to approve

DoE concluded their presentation by telling MPs that the treaty would be introduced to Parliament for ratification in due course and negotiations on the outstanding protocols on tariff setting also needed to be finalised.    On a critical path plan were also negotiations with transit countries and a final feasibility study on the direction that the transmission line would take.

Ompi Aphane, in responding to a number of MPs questions, said that on environmental issues, which were in article 14 of the treaty, carbon credit matters has been taken into consideration and more would be heard on this.

SA not involved in dam

On the critical issue of finance, Ompi Aphane said that MPs should realize that other than the possibility of transmission lines, SA was not involved in dam construction and the country would be paying for power on connection, plus in all probability building a transmission line to connect to the SA grid.   Consequently there were no major debt issues arising at present.

Ntsiki Mashimbye, SA’s ambassador to the DRC, was present at the meeting and commented that the Grand Inga project “was not a project in isolation, not even just about electricity, but about industrializing Africa as a whole.”

The minister concluded by commenting that the integration of the African continent was the target as well as providing clean energy sustainability for South Africa and all the benefits that would ensue, including resale to other nations.
Other articles in this category or as background
http://parlyreportsa.co.za/uncategorized/grand-inga-hydroelectric-power-getting-under-way-at-last/
http://parlyreportsa.co.za/energy/integrated-energy-plan-iep-around-corner/
http://parlyreportsa.co.za/energy/doe-talks-biofuels-and-biomass/

Posted in Electricity, Energy, Enviro,Water, Facebook and Twitter, Finance, economic, Fuel,oil,renewables, Land,Agriculture, LinkedIn, Trade & Industry0 Comments

Energy gets war room status

Cabinet creates energy crisis committee…..

Editorial…….

eskom logoIn retrospect, for the cabinet having had to resort to establishing an energy war room is probably a good thing inasmuch that a meeting of minds appears to have taken place at all levels of the ANC Alliance on energy matters. The situation is indeed serious.

The message from business and industry that the “energy crunch” is not only immensely threatening to the economy appears to have got through, accompanied probably by the realisation that so many regular failures, power or otherwise, are threatening to the ability of the ANC to stay in power.

Foggy outlook

Perceived at first as an issue mainly affecting the rural poor, the failure of Eskom to deliver on most of its promises; the bumbling of the department of energy on independent power producer parameters and the to-ing and fro-ing of cabinet on the adoption of nuclear energy into the energy mix, has been somewhat of a pantomime.

For months we have been reporting from Parliament on the ambivalence of Eskom and the reluctance of the department of energy and public enterprises to chart a course on energy.

The whole truth…

NA with carsHowever, what is a matter of concern is the fact that in all those lengthy power point presentations and detailed reports to parliamentary committees that we have witnessed or read, the ball has been completely dropped on the energy issue and badly so.   At the very least Parliament were not given the full facts, particularly in the case of Eskom, thus threatening the parliamentary oversight process.

Deputy President Ramaphosa has now been designated to oversee the turnaround of SAA, SAPO and Eskom. The cabinet statement says regarding this, “Working with the relevant ministries, SAA will be transferred from the department of public enterprises to national treasury. The presidency will closely monitor the implementation of the turnaround plans of these three critical SOCs that are drivers of the economy.”

Maybe next year

It is comforting therefore to some extent to know that such a “war office” has been established and that cabinet has adopted a five-point plan to address the electricity challenges facing the country but it just seems incorrect that a relatively empty, tired statement such as “more cross cutting meetings to meet the challenges facing  the country will be adopted” was all that could be added in the form of action before ministers disappeared for the Christmas recess, including, we understand, the contractor’s staff at Medupi.

elec gridIt seems that nobody is in charge over the same period nor interested enough to be there and nobody is really looking much beyond January 15, when South Africa starts switching on again.

 

Perhaps in 2015, some reality will return to South African politics and amongst the governing party. They may learn that there is a direct relationship between being in power and keeping the power on and we foresee many more direct confrontations on this issue and others in Parliament during the coming year.

 

 

Posted in cabinet, Electricity, Energy, Finance, economic, Fuel,oil,renewables, LinkedIn, Public utilities, Security,police,defence, Trade & Industry0 Comments

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