Tag Archive | Coega

PetroSA has high hopes with the Chinese

Sinopec agreement necessary

PetroSA logoDr Benny Mokaba, an independent consultant on energy planning and options working for PetroSA, confirmed to parliamentarians of the energy committee that a framework agreement had been signed between PetroSA and the giant Chinese petrochemical company, Sinopec. As a result, the Mthombo refinery project at Coega, “continues to gather momentum”.

He asked parliamentarians to remember “that this project had been named as one of the six major projects of the New Growth Plan”.

Crucial infrastructure problems affecting the project were described as rail, port and pipeline issues, relationships with the Coega Development Corporation, Eskom power and dealing with provincial and municipal matters. As this was a presidential “SIP” project, ongoing engagement and reporting on status was being given but parliamentarians were advised that “due to the competitive nature of the industry, very little more could be said.”

Refinery and gas projects

Dr Mokaba said that in the year under review PetroSA had continued to operate safely and profitably; that the Mossel Bay refinery “sustenance” had remained a key focus and the Ikhwezi offshore gas project is progressing well, drilling having started and first gas expected shortly.

However, he said that PetroSA faced increasing challenges with declining feedstock; increased competition for hydrocarbon assets; a weak rand and funding limitations; with the result that it’s cash “was depleting at a fast rate”.

African ventures

Most of the focus of the strategy was on the “upstream plan”, where Dr Mokaba said that PetroSA would “consolidate its recent acquisition in Ghana, known as ‘Sabre’; finalise “farming out” 55% of its equity stake in a block in Equatorial Guinea; and was looking at funding options for a possible acquisition in Venezuela. (During the presentation the exposure by the media of PetroSA of problems in dealings in Ghana had not been made, nor was it mentioned at this meeting)

Sinopec important to the venture

CoegaJoern Falbe, vice president, new ventures, PetroSA, said on midstream matters that the main issue was “we know what we don’t know” and this had led to better planning certainty and the realization that experts, especially when it came to the Mathombo project, were needed.

He pointed out that PetroSA were not the real experts in mega-projects such as this – in fact total project managers and logistical team expertise hardly existed in SA for this kind of undertaking to be handled “in house”, but Sinopec from China were, in their view, the answer and that is why the new framework agreement was an important stage to have finalised.

“We are working closely with IDC over the Mathombo project as well and through them we shall get the financing correct”, he said.   Members asked if government guarantees were going to be needed but this stage had not yet been reached, was the reply.

Little happening downstream

PetroSA said nothing on downstream issues other than to mention a petrol station was being built at Mbizana, working with the local community. Mbizana is a large municipal area located in the Eastern Cape Province on the R61 road connecting KwaZulu Natal south coastal boundary to the N2 highway with a population of approximately 246 500.

On downstream issues generally, the chair explained that PetroSA was in a competitive world and this would not be discussed
Associated articles archived
http://parlyreportsa.co.za//uncategorized/better-year-for-petrosa-with-offshore-gas-potential/
http://parlyreportsa.co.za//uncategorized/integrated-energy-plan-iep-is-not-crystal-ball-gazing-says-doe/

Posted in Energy, Finance, economic, Fuel,oil,renewables, Land,Agriculture, Public utilities, Trade & Industry, Transport0 Comments

Nedlac gets a stronger voice in SEZ management

Long time in making

Coega harbour equipMinister of Trade and Industry, Rob Davies, told parliamentarians that much of the delay in bringing the Special Economic Zones (SEZ) Bill to parliament was the result of lengthy negotiations on SEZ board make-up.

Whilst the draft Bill was at Nedlac negotiation stage, it had resulted in the proposed six independent members of the fifteen member SEZ board were now proposed as three independent members from Nedlac “constituencies”, the other three independents being proposed by the minister.

However, DTI had insisted that the three Nedlac independents balancing the independents, presumably from business, meet a criteria set rob daviesby DTI and the minister.

Linking SEZs to IDZs

Another reason for the lengthy gap between the Bill first appearing for public comment and its tabling was that a considerable amount of work and input had been made at provincial and localised areas in places such as Coega and East London, where SEZs were in embryonic stage, or in areas where IDZs were about to happen such as Saldanha.

DTI was at pains to state that the two complimented each other, although SEZs were a subsequent development found necessary to develop all areas of South Africa, especially in depressed rural areas, whereas IDZs were linked to ports or international airports.

The new SEZ board will administer proposals for SEZs, run funding mechanisms and handle incentives, said minister Davies. In each area set up, DTI will be responsible for setting up a “one stop government shop” to deal with all government departmental issues involved with the investors dealing with the particular SEZ.

State will work with partners

The Bill will provide for municipalities, in fact any tier of government, to apply for an SEZ but a rigorous process of evaluation is called for in terms of the Bill where a business applies for an SEZ in evaluating whether a municipality is capable or has the capability to provide the services called for. No private ownership of a SEZ will be allowed but private and public partnerships are to be encouraged.

DTI provided Parliament with the figures to date on progress with existing IDZs amounting to some R3bn providing nearly 50,000 jobs. Saldanha particularly had provided a strong foundation for the oil and gas industry in that area, said Lionel October, director general, DTI.

Four types

Most importantly, October said that the SEZ Bill provided the missing framework for this kind of area industrial development and there were four types of or categories of SEZ, which were a free port; a free trade zone; an industrial development zone; or a sector development zone.    Any government or municipal involvement is to be in terms of both the Public Finance and Municipal Finance Management Acts, the Bill proposes.

In answer to comments that Kenya and Nigeria were ahead of South Africa in such investment offerings and speed and good incentives were essential, Minister Davies responded that it was not a question of anybody being “ahead” of anybody.   South Africa, he said, wanted to see all of Africa grow and South Africans wanted to be able to trade with the whole of Africa. All of Africa must grow for all to benefit. It was not relevant to him, he said, whether Nigeria was economically larger or smaller than South Africa.

Will SEZs override traditional land?

Various MPs gave voice to the worry of land issues in rural areas where SEZs were to be established or created but DTI expressed little concern on this matter as far as drafting the Bill was concerned.     DTI responded that that such issues were specific to an individual SEZ and such matters would be dealt with in terms of an individual application and by the individual SEZ working party involved.

The primary concern, said DTI, had to be the re-industrialization of the rural areas.
Associated articles archived
http://parlyreportsa.co.za//finance-economic/special-economic-zones-sez-bill-to-be-be-up-shortly/
http://parlyreportsa.co.za//cabinetpresidential/sez-programme-to-get-going-with-new-bill/

Posted in Cabinet,Presidential, Finance, economic, Labour, Land,Agriculture, Mining, beneficiation, Trade & Industry, Transport0 Comments

South Africa to stick with published fixed fuel pricing

On briefing parliamentarians in the portfolio committee on energy on fuel pricing in South Africa and the planned “roadmap” for the future of liquid fuels being undertaken by government, Muzi Mkhize, DG of hydrocarbons in the department of energy (DOE), indicated that South Africa would continue on its current course of formula-based fixed fuel pricing for the foreseeable future.

He said this was DOE’s preferred option rather this than go for a “liberalised” system, such as is the case in Australia, where market forces operate within a structure overseen by a state consumer and competition watchdog.

The department’s director for petroleum and petroleum infrastructure policy, Jabulani Ndlovu, told parliamentarians that the import parity pricing system was being retained, with zonal pricing fixed according to magisterial districts.

A transport cost allowance built in based on least price working from pipeline to rail, then as last option, road delivery will continue.

Under questing from MPs as to whether Sasol would ever be allowed to operate independently and fix its own possibly lower prices,  he said that both Sasol and those imported crude oil and who had built refineries locally to all had to be equated in the same pricing model.

If Sasol were to follow such a course, Ndlovu said. The consequent consumer shift would be totally beyond Sasol’s capability to supply and at the same time threaten the whole of the current national refining structure, particularly where continued investment was needed by current oil companies as far as the development of cleaner fuels was concerned. He told parliamentarians that a course involving a completely free market would never be on the department’s strategic agenda.

Ndlovu explained that the basic fuel price (BFP) was based on a parallel pricing structure, or comparison made with an “importer buying the refined product from overseas seller and transporting the same to the market place in South Africa incorporating such costs as losses at sea and landing.”  It is to be assumed that he also meant to include storage costs.

However, Ndlovu said, the BFP system resulted in under and over recoveries in the light of changing crude oil prices on an agreed global market cross section and the national BFP, calculated on the first Wednesday of each month, corrected the previous month’s price differential. But then levies had to be added, he said.

This amounted to a pipeline levy run by Transnet to the interior for capital cost recovery; a levy on the quantity pumped whatever the product and a dye levy to curtail the illegal mixing of paraffin and diesel.

He then explained to parliamentarians that in addition there was a “slate” levy, a self-adjusting mechanism to finance the effect of cumulative petrol and diesel grades under recoveries realised by the petroleum industry and run by SAPIA, the petroleum association, in response to daily changes between the BFP and the petrol and diesel and price structures as announced by the state monthly as per the monthly fuel price media statements. The “slate” is cleared when reaching once exceeding R250m and re-distributed back to the industry.

On the issue of illuminating paraffin (IP) and liquified petroleum gas (LPG) the formula for each was explained, most of the problems existing, particularly in the case of IP, where products were sold on the open market and exploitation of the poor in rural areas often took place due to lack of alternative sources.

On external exported finished product, a number of neighbouring countries who bought diesel and petrol products  from SA did not necessarily have the same structure of levies, Ndlovu said, accounting for the fact that sometimes landlocked neighbours had fuel that was cheaper than in SA.

On the 20-year “roadmap” that was being planned for South Africa by DOE in an attempt to ensure that the country retained access to “reliable, affordable, clean, sufficient and sustainable sources of energy to meet the country’s demand for liquid fuels”, DOE confirmed that the department was three months behind in producing such a plan.

This Jabulani Ndlovu said, was because of the “difficulty in getting data from the oil companies” but under questioning from MPs, he admitted that there has been incompatibilities in the way questions were put to stakeholders making the answers difficult to supply due in the main to a lack of understanding on how the industry worked and separation of data facts according to the question asked.

He said DOE had leant much in the process of compiling such a “roadmap” and that it was being undertaken to encourage investment, promote diversity of supply to deal better with supply disruptions and to ensure an “integrated government response in dealing with issues on liquid fuels.”

DG Muzi Mkhize promised that the plan would be released in draft form by 30 January 2013 and the final report published by 15 February. He said he hoped DOE would be undertaking a refinery audit next year.

Neither DG Mkhize nor Jabulani Ndlovu would be drawn on the subject of “Project Mathombo”, PetronetSA’s proposed refinery for the Coega port area, nor would they be drawn on how the products would reach the market, whether by pipeline or rail.

Ndlovu said that this, they understood, was still in “feasibility study stage” with an international funder and the whole issue of any finished product emanating from the Eastern Cape had not been taken into account in the “roadmap”.

Posted in Energy, Finance, economic, Fuel,oil,renewables, Public utilities, Trade & Industry, Transport, Uncategorized0 Comments

DTI claims new SEZ investment incentives are better

In launching it’s new Special Economic Zone (SEZ) plan, the department of trade and industry (DTI) has admitted to Parliament that a lack of specific attractive incentives did not lure investors to the various IDZs in South Africa in the manner intended accompanied by somewhat “ad hoc” funding arrangements with national treasury.

There was also insufficient marketing and a lack of stakeholder co-ordination, DTI has said.

Lionel October, director general of DTI and his team were asked to present to Parliament on the readiness of the new Special Economic Zones (SEZs) which are planned to substitute as a new investment drive and how the existing IDZs would be incorporated into the new plan.

In retrospect, October explained to parliamentarians, DTI had found that it’s officials  had often been provided with insufficient or untimely oversight of individual strategic plans and operations of the IDZs themselves had found the regulatory framework provided by DTI for the operation of IDZs insufficient to guide long-term planning and coordinate plans in order to integrate into other national, provincial and regional strategies.

Between the years 2002 to 2012, the government of South Africa has expended a total of R7,6bn to the three functioning IDZs on the East coast, R5,4 billion(76%) of this coming from the DTI’s budget and R 1,7bn from the host provincial governments.

Meanwhile, over the eight years of its operation, the current plan has attracted a total of 44 investors who DTI claimed have invested some R12.3bn, creating they say some 38,000 direct and indirect jobs.

Lionel October told parliamentarians that DTI now planned a “one stop shop model for investors where bureaucratic red tape will be reduced”; that the IDZs would be incorporated and integrated with SEZs with the assistance of experts identifying weaknesses in the previous systems and that DTI was developing a marketing strategy for the integrated result.

Tumelo Chipfupa, DTI’s deputy director-general, told the parliamentary committee that DTI admits that the three IDZs (Coega, East London and Richards Bay) should have achieved better results and a lot more had been hoped for but the result of under-achievement had resulted mainly because “the funding model did not cater for the dynamics needed by investors and the fact that allocation of funds had been inconsistent and inflexible”.

Posted in Finance, economic, Land,Agriculture, Public utilities, Trade & Industry, Uncategorized0 Comments


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