South Africa at energy crossroads:DOE speaks out

Frank overview of current SA picture…

oil barrelSouth Africa has to wean itself off on total reliance on oil, said Tseliso Maqubela,  deputy director general, department of energy, in Parliament recently. “But we have to do this in phases because all the options are either not ready yet, not happening, or the developmental phases have not yet told us whether certain options are viable.”

When presenting a department of energy response to President Zuma’s state of the nation address (SONA), which in fact carried but few remarks on energy matters, Maqubela prefaced his department’s presentation with a number of comments on the oil and energy scenario facing South Africa generally.

Stuck in a grove

Looking at the fuel situation as it stood at the moment with oil prices spiraling, Maqubela said that South Africa had relied too map_iranheavily in the past on Iranian, Singapore or Arab gulf sources “with the result that when something happens in Europe and they start going to our sources an upward trend in prices becomes very marked.”

International refinery situations have also played a role in the oil price now faced by South Africa, he said. “Currently, North America goes through its normal winter refinery shut down period for maintenance at this time and their purchasing picture changes accordingly with a purchasing move towards the Mediterranean, adding to the upward pressure on sources and therefore prices.”

Pressure points

“Added to this, the uncertainty in the Middle East, particularly Syria, and odd uncertainties occurring in such countries as Gabon and Venezuela and you have the current picture of pressure points painting a bleak picture for South Africa, with very little change to hope for in the future.”

South Africa will have to counter constantly rising oil price situation in phases, Maqubela said. As far as demand and supply locally is concerned, whilst the petrol engine is becoming more efficient every year, we cannot phase out old vehicles in the same way that this is possible in other countries such as the UK. There are circumstances here which mitigate such courses of action, but more efficient fuel and engines will help in the long term.

Biofuels situation still muddied

sorghumMaqubela said the second unclear issue is biofuels, water being a constraining factor. “What is not happening in biofuels, however, is that we are not separating the value chain to say ‘who does what’.   This we must do.   Gas and biofuels have a very important role but this might not come in to play in the short term either.”

Electric vehicles are a possibility, he said “but it is still just this and no more”. Gas vehicles were a little closer, with Johannesburg City running pilots but in the immediate future, the situation was not going to change markedly because of such developments.  Here the consumer is involved in matters of choice.

Sasol big player

Maqubela commented that in the short term, problems in the area of supply and demand were that SA was in a demand situation of about 700 000 barrels of oil a day, and with Sasol bringing in about 130,000 a day with coal-to-liquid, the economics of bringing Sasol in to solve problems would not solve any macro-economics in the short term.

However, in the longer term or with longer phased solutions, the situation was more hopeful and gas will play a major role, said Maqubela.   Indeed, the President had played up the recent gas discoveries in SONA but this should be tempered by what is happening to our North and which is not satisfactory.

Get regulatory stability in gas

map-mozambique“We must bear one thing in mind”, he said. “We have to create a regulatory climate of certainty now for the gas explorers and developers. In too many countries to our North, in Kenya for example, once gas discoveries became a major reality, their governments went off into a regulatory re-vamp changing the whole regulatory scenario, thus completely changing the investment climate for the worse. This we must not do.”

He called for the urgent adoption of the amendments to Minerals and Petroleum Resources Development Act (MPRDA) now published for comment to create an environment now that would stand into the future so that all knew where they stood, there was certainty in planning and that things were not going to change, as they have in other countries where gas was found.

The export of lubricants had been hoped for, he said, but the EU market had highly sophisticated products and we would have to work very closely with our refineries to enter this market, if at all.

Fuel theft big issue

One thing that had to be dealt with, however, he said and that was theft of fuel in the supply chain. This was currently being carried out by a sophisticated gang of exploiters, both in the public and private sector involving anything from transporters to sellers. Fortunately, he said, “we think we are on top of this” and “something is about to happen”.

DOE in their presentation noted the President’s comments in SONA recently regarding the R860bn infrastructure programme and in summation said the DOE contribution was clearly in the area of the renewable energy IPP programme; the new base load power stations in coal, gas and co-generation; the rehabilitation of the electricity distribution infrastructure system; continued access by households to electricity; and cushioning the poor from increased tariffs through solar water heaters.

Shortages possible

It was noted that electricity generation had now become a constraint to growth and until Medupi and Kusile power stations came into operation there could be shortages. This would be exacerbated by the tight-demand balances, with the reserve margin deteriorating from 15.4% in 2010 to less than 10.14% in 2012. Nevertheless, South Africa had to focus more on its distribution system to gain total security.

Bearing in mind consumer demand was down, the “safe margin” was not coming into play although Cahora Bassa supplies had recently tripped, indicating the external resources were a worry but if growth should improve, the situation as it stood situation would improve markedly. (The media reported recently that Koeberg also had “gone down”, threatening supply).

Universal electrification achievable

Dr Wolsey Barnard noted that an electrification road map that was realistic had been rolled out which indicated that in terms of SONA, utilizing different technologies, it was possible to achieve universal access to electricity by 2025 in all areas of South Africa.

He said an inter-departmental team was considering the best approach for determining the next round of electricity tariff increases for Eskom, which is due to take effect in April 2013.

In looking at the future, he commented, all now depended on the production of the integrated resource plan (IRP) and the implementation of an integrated energy master programme, which would include the independent power producer (IPP) programme and reflect their contribution into the grid, however this maybe finally structured.

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