Tag Archive | Billiton

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

Electricity tariffs: Billiton tells its side

Benefits amounted to massive subsidy….

Mhkwanazi BillitonThe cumulative benefit to Eskom as a result of BHP Billiton buying out Eskom’s excess capacity of electricity generated over the 14 years until the recent 2008 crisis amounted to a figure in excess of R26bn, Dr Xolani Mkhwanazi, chairman of the South African company, told parliamentarians of the trade and industry committee.

What is more, he said, when Eskom’s near collapse occurred in January that year due to heavy rains, flooded collieries and low coal supplies, BHP Billiton mothballed for some time its Bayside aluminium plant with no compensation and with the purpose in mind of preventing further national blackouts.

Protecting grid together

The company now works, he said, on an ongoing basis with Eskom, both managing and protecting the grid by adjusting demand from its Bayside and Hillside aluminium smelters. No compensation is asked for

In answer to MPs further questions on this subject, he said, “We know we are operating in an environment where there are currently conditions of restraint that have to be exercised.”   He repeated again that such restraints were carried out as a joint exercise to protect the grid as a whole.

These facts were made public to parliamentarians this week after months of questioning by MPs during numerous portfolio committee meetings at which Eskom said it could not discuss the special rates negotiated with large power users, known as NPAs or negotiated power agreements, particularly that which had been negotiated some years ago with BHP Billiton.

Shielding Billiton

Dr Mkhwanazi confirmed that agreements in the past between BHP Billiton and Eskom were related to the international price of aluminium to the Rand/Dollar exchange rate, thus shielding BHP Billiton from local market related problems since the formula when applied meant that in times of high aluminium on a weak rand, lower prices are paid for power.

It had to be borne in mind that such agreements were conducted when Eskom was in highly favourable reserve margin situation, he said. A new NPA has now been struck with BHP Billiton, Dr Mkhwanazi confirmed under questioning.

When asked by opposition ID member Lance Greyling from the energy portfolio committee, who attended the meeting as a guest MP, whether under the new tariff arrangements the contract was still linked as before on a risk sharing basis based on the global price of aluminium, thus shielding BHP Billiton, Dr Mkhwanazi at first did not answer the question

When pushed again on the subject in a second round of questioning, Dr Mkhwanazi replied, “Yes”.

Why Mozambique?

When asked why BHP Billiton had gone into aluminium smelting at Mozal in  Mozambique when Richards Bay appeared undercapitalized at one point, Dr Mkhwanazi pointed to the very advantageous incentives offered by that country some years shortly after peace had returned to the territory.

Lucas Msimanga, asset president, BHP Billiton Aluminium, said that the group’s operations covered three main resources – coal, aluminium and manganese.

Manganese was centred around Hotazel in the Northern Cape and the larger reserves of the Mamwatan open-cut and Wessels underground operations, both in the Kalahari.

It was a fact that 80% of the world’s high grades of manganese existed in South Africa but, said Msimanga, both were in remote situations thus involving high transport cost. Consequently, said Msimanga South Africa had about only 11% of the world market based on pricing factors.

BHP Billiton had five collieries and supplied 25% of Eskom’s coal.

Aluminium eats electricity

On aluminium operations, he said the group was the eighth largest aluminium producer in the world and the two smelters were originally constructed to “absorb the excess generation capacity of Eskom in the late 1980s when Eskom had a reserve margin of 40%.”

Msimanga reminded parliamentarians that aluminium was little more than solid electricity, the furnaces taking calcined petroleum coke, mixed with molten pitch to 1100ºC over 21 days, the resulted aluminium anodes going through electrolytic reduction processing “pots” for a further 27 days. To be in aluminium industry, he said, you were deep into the energy industry, bearing in mind BHP Billiton was also a coal producer.

In manganese, the M14 BHP Billiton furnace was probably the largest in the world and exercises currently being carried using CO gas to the onsite power plant raising self-sufficiency in energy was an important exercise at present being conducted. This was aimed at a hoped for reduction in CO2 footprint.

Associated articles archived

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