Tag Archive | DOE

Competition Commission gets to know LPG market

 DOE holds off on LPG regulatory changes…

Sent to clients 25 Oct….In a briefing to the Portfolio Committee on Energy on the report by the Competition Commission (CC) into the Liquified Petroleum Gas (LPG) sector, acting Director General of the Department of Energy (DOE), Tseliso Maqubela, has again told Parliament that the long-standing LPG supply shortages are likely to continue for the present moment until new import infrastructure facilities come on line.

He was responding to the conclusions reached by the CC but reminded parliamentarians at the outset of the meeting that the Commission’s report was not an investigation into anti-competitive behaviour on the part of suppliers but an inquiry, the first ever conducted by the CC, into factors surrounding LPG market conditions.

Terms of reference

In their general comments, the Commissioner observed that the inquiry commenced August 2014 on the basis that as there were concerns that structural features in the market made it difficult for new entrants and the high switching costs for LPG gas distributors mitigated against change in the immediate future.

They worked on the basis that there are five major refineries operating in South Africa, these being ENREF in Durban, (Engen);

refinery

engen durban refinery

SAPREF in Durban, (Shell and BP); Sasol at Secunda; PetroSA at Mossel Bay; and CHEVREF in Cape Town (Chevron). There are four wholesalers, namely Afrox, Oryx, Easigas and Totalgaz.

Wholesalers different

As far the wholesalers are concerned, in the light of all being foreign controlled, CC also observed that transformation was poor, but this was not an issue on their task list, they said. They had assumed therefore that BEE legislation was difficult to enforce and that the issue had been reported to the Department of Economic Development, the portfolio committee was told.

Price regulation at the refineries and at retail level is supposedly determined by factors meant to protect consumers, the CC said, but their inquiry report noted no such regulations specifically at wholesale level. This fact was stated as being of concern to the CC in the light of known “massive profits in the LPG wholesaling sector”.

Structures

Commissioner Bonakele said, “We started the inquiry because of the worrying structures of the market but in benchmarking our market structures with other countries and we found LPG in SA was not only unusually expensive but was indeed in short supply. Why? When it is so badly needed, was the question, he said

The CC established from the industry that about 15% of LPG supplied is used by householders and the balance is for industrial use.   In general, they noted that there were regulatory gaps also in the refining industry but regulatory requirements were over-burdening they felt and contained many conflicts and anomalies.

The CC had also reported that the maximum refinery gate price (MRGP) to wholesalers and the maximum retail price (MRP) to consumers were not regulated sufficiently and far too infrequently by DOE.

Contentious

There needed to be one entity only regulating the entire industry from import to sale by small warehousing/retailers, they said. The CC suggested in their report that the regulatory body handling all aspects of licensing should be NERSA .

As far as gas cylinders were concerned, Commissioner Bonakele noted in their report that there are numerous problems but their criticism was that the system currently used was not designed to assist the small entrant. The “hybrid” system that had evolved seemed to work but there was a “one price for all” approach.

DOE replies

In response, DG Maqubela confirmed that the inquiry had been conducted with the full co-operation of DOE into an industry beset with supply and distribution problems, issues that were only likely to change when there were “adequate import and storage facilities which allowed for the import of economic parcels of LPG supplied to the SA marketplace.”

When asked why local refineries could not “up” their supply of LPG to meet demand, DG Maqubela explained that only 5% of every barrel of oil refined by the industry into petroleum products could be extracted in the form of LPG. Therefore, the increase in LPG gas supplied would be totally disproportionate to South Africa’s petrol and diesel requirements.

Going bigger

Tseliso Maqubela, previously DG of DOE’s Petroleum Products division, told the Committee that two import terminal facilities have recently been commissioned in Saldanha and two more are to be built, one at Coega (2019) and one at Richards Bay (2021). These facilities were geared to the importation of LPG on a large scale.

He said, in answer to questions on legislation on fuel supplies, that DOE were unlikely to carry out any amendments in the immediate future to the Petroleum Pipelines Act, since the whole industry was in flux with developments “down the road”.
It would be better to completely re-write the Act, he said, when the new factors were ready to be instituted.

Rules

On the regulatory environment, DG Maqubela pointed out that for a new refinery investor it would take at least four years to get through paper work through from design approval to when the first spade hit the soil. This had to change. The integration of the requirements of the Department of Environmental Affairs, Transnet, the Transnet Port Authority, DTI, Department of Labour, Cabinet and NERSA and associated interested entities into one process was essential, he said.

On licencing, whilst DOE would prefer it was not NERSA, since they should maintain their independence, in principle the DOE, Maqubela said, supported the view that all should start considering the de-regulation of LPG pricing. He agreed that DOE had to shortly prepare a paper in on gas cylinder pricing and deposits which reflected more possibilities for new starters.

MPs had had many questions to ask on the complicated issues surrounding the supply, manufacture, deposit arrangements, safety and application of cylinders. In the process of this discussion, it emerged, once again, that LPG was not the core business of the refinery industry and what was supplied was mainly for industrial use. The much smaller amount for domestic use met in the main by imported supplies for which coastal storage was underway over a five-year period.

Refining

DG Maqubela noted that on Long Term Agreements (LTAs) between refineries and suppliers, DOE in principle agreed with the Commission that LTAs between refiners and wholesalers could be reduced from 25 years to 10 years, to accommodate small players. Again, he said, this would take some time to be addressed, as was also an existing suggestion of a preferential access of 10% for smaller players.

All in all, DG Maqubela seemed to be saying that whilst many of the CC recommendations were valid, nobody should put “the cart before the horse” with too much implementation of major change in the LPG industry before current storage and supply projects were completed.

However, the current cylinder exchange practice must now be studied by DOE and answers found, Tseliso Maqubela re-confirmed.
Previous articles on category subject
Overall energy strategy still not there – ParlyReportSA
Gas undoubtedly on energy back burner – ParlyReportSA
Competition Commission turns to LP gas market – ParlyReportSA

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Hide and seek over R14.5bn Ikhwezi loss

Facts on Ikhwezi loss held back

…sent to clients 12 Dec… In the first of several meetings of the Portfolio Committee on Energy regarding Central Energy Fund’s Ikhwezi Project, chairperson Fikile Majola has agreed with ANC MPs and Opposition members to reject the Department of Energy (DOE) report on the PetroSA impairment or write-off amounting to R14.5bn.  Continue Reading

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Central Energy Fund hatches fuel plan

A lot going on at Central Energy Fund…..

Central Energy Fund (CEF), the state utility which controls the Strategic Fuel Fund (SFF) and fosters PetroSA, cef logohas again been outside of a plan that has Parliamentary approval or, it appears, Treasury knowledge.    CEF falls under the aegis of the Department of Energy (DOE) and is therefore responsible to Minister of Energy, Tina Joemat-Pettersson.  Clearly there is much going on of which Parliament knows nothing – in recess as it is.

The history of CEF’s  problems go way back before the period during which  previous Minister of Energy, Ben Martins, held office and even before Ben Martins, as an MP was chairperson of the Parliament Portfolio on Energy. Most of CEF’s troubles appear to involve the fuel storage facilities  at Saldanha Bay on the West coast and PetroSA’s operation on the East coast, causing considerable negative comment from the portfolio committee and Ben Martins himself at the time. Sadly, Minister Martins was not chosen to remain by President Zuma.

tina-joemattQuite clearly a plan has been hatched to meet Cabinet ambitions.

Glaring omission

It was only after  Minister Joemat-Pettersson’s current budget vote speech did the investigative journalism of the newspaper media discover the sale of almost completely the entire SA reserve oil stock of the Strategic Fuel Fund (SFF) held at Saldanha Bay.

Not only was the sale concluded without any mention but the quantity of fuel involved appears to have been a major financial  decision  undisclosed in any cabinet statement.    It appeared that CEF had allowed SSF to sell 10 million barrels of crude — close to the entire stockpile — in a closed tender at the point that the oil price had bottomed at somewhere around R34 Brent.

It also appears that this was without the agreement of Finance Minister Pravin Gordhan and Treasury whosepravingordhan concurrence is needed under the Central Energy Fund Act.  How this will play with Treasury and the Auditor General is not clear, nor whether when and how CEF intends to replace this. The Democratic Alliance will no doubt be asking for answers in parliamentary question papers.

What the Minister said

It is interesting to note exactly what the Minister had to say to Parliament about SFF in holding back, it appears, on such major financial move. She told MPs that in line with the Presidential Review Commission on State Owned Entities (SOEs) that her Ministry had been working towards “a review of the composition of the CEF Group of companies.”

She went on to say, “Our work in this area includes the strengthening of the entities in the oil and gas sector and the stated policy objective of the creation of a stand-alone national oil company, using PetroSA as a nucleus.”
SFF had a good revenue base, she said.

saldanah bay 2“We shall finalise this work by October 2016”, Minister Joemat-Pettersson said and she would revert to Parliament on Cabinet views and strategies for a revised energy sector framework. “Accordingly, in 2015, the Ministry of Energy issued a ministerial directive for the rotation of strategic stocks in the SFF and this has resulted in an increased revenue base for SFF whilst at the same time maintaining stocks within our storage tanks for security of supply.”

Long term view

“This as a result, the Minister continued, “of a long term lease and contractual agreements with the buyers. The estimated revenue to accrue from this process is around R 170 million per annum, significantly boosting the balance sheet of the SFF.”

The Minister concluded that through the rotation of strategic stocks and trading initiatives the SFF had further consolidated its ability to be self-sustainable. “This has also allowed us to replace the unsuitable stock that we have been storing in our tanks which has been both uneconomical and did not contribute to security of supply.”

“The SFF will continue to ensure that it is able to respond to any shock in the market, whilst optimally making use of the opportunities presented in an evolving oil sector”, she concluded regarding West coast activities.No figures were given nor a clear indication mentioned that a sale had been concluded.

  SASAL LOGOHowever she was particular in supplying numbers regarding the joint venture between Sasol and Total when she said, ” Effective from 1 July 2006, Sasol Oil sold 25% of its shares to Tshwarisano LFB (Pty) Ltd, a broad based black economic empowerment consortium comprising of 150,000 direct shareholders and 2,8 million beneficiaries. The value of this transaction amounted to nearly R1.5 Billion, making it a significant BEE transaction in the liquid fuels industry.”

Trading nightmare

Therefore, the sale of nearly the entire reserve held by SFF, whether it is kept in the same tanks at Saldanha or not, at an oil price when at it’s very lowest, “suitable” or not, and being obliged by the Act to eventually replace it some later point should get an explanation.   However, it seems that there was an incentive to sell.

Also, to have to buy back at an oil price which is currently already well over double would appear to be completely against the tenets of the Public Finance Management Act; what the Auditor General is bound to call “fruitless and wasteful expenditure”; and contradictory terms of the Minister’s statement to Parliament that the SFF “has the jacob zumaability to be self-sustainable”. Unless, of course it is bolstered by external funds. 

Gas nightmare.

Parliament is of course closed for the election recess but no doubt there will be a parliamentary uproar on the subject – if not an investigation, which will come on top of the further current investigation of CEF’s activities as far as PetroSA is concerned.Once again the question will arise on how it was possible for PetroSA to continue with Project Ikhwezi when drilling for gas for two years in an area already defined by experts as impractical in lieu of fault lines in the projected gas field.

Central Energy Fund seen as politically driven

R11.7bn was the total “impairment” of PetroSA, the result of underperformance of Project Ikhwezi in its efforts to supply gas onshore to Mossgas. The total PetroSA loss for 2014/5 was in reality R14.6bn after tax. Currently a team comprising of industry experts is now defining a new strategy to save the PetroSA in its offshore struggle on the East coast, according to DOE reports to Parliament.

Roughnecks wrestle pipe on a True Company oil drilling rig outside WatfordThe experts were not named but the exercise is entitled Project Apollo and reports were also given to Parliament that the team has progressed well so far, said controlling body Central Energy Fund during 2015.

PetroSA was originally flagged by Cabinet some twelve years ago as “South Africa’s new state oil company”.     Last year, CEF described at the time PetroSA’s performance in their annual report to Parliament as “disappointing”, resulting in harsh criticism last year from the Portfolio Committee on Energy. The subject was not raised this year by the Minister in her Budget vote speech.

Failed deal

What, however, was raised in opposition questioning in the National Assembly by Pieter van Dalen, DA Shadow Deputy Minister of Energy, was Central Enegy Funds venture into the proposed purchase of Engen’s downstream activities from Malaysian company Petronas, known as “Project Irene”. This was understood to be the Cabinets secret plan to own the promised state oil company.

fuel tanker engenThe purchase from Petronas, who own 80% of Engen, was an attempt through Central Energy Fund to gain a foothold in the fuel retail and forecourt space by acquiring a stake in Engen, South Africa’s largest fuel retailer. The remaining stake is held by the Pembani Group.

First try

The board of PetroSA was repeatedly advised by both transaction advisers and the Treasury, according to Deputy Shadow Minister van Dalen, “that the proposal to buy the Engen stake did not make good business sense.”
“However,” van Dalen said to MPs, “the project was strongly championed by Minister Joemat-Pettersson and President Jacob Zuma. In the end, the deal fell through due to lack of financing.’These sort of things cannot go on”, he said.

The last word

This particular meeting in the National Assembly was completed by Shadow Minister of Energy, Gordon Mackay,gordon mackay DA attacking the Minister for “misleading the country on nuclear energy deals.”

He concluded after a long speech on the subject of the proposed nuclear build programme and what he referred to as “anomalies”, with the remark “We must ask ourselves Chair – why is our government doggedly pursuing this nuclear deal. It is clearly not a deal in the interests of the poor. It is clearly not a deal in the interests of business. It is clearly not a deal in the interest of the nation.”

Gordon Mackay did not know about the Chevron approach, or at least he did not indicate that he did.

Previous articles on category subject
Central Energy Fund slowly gets its house in order – ParlyReport
PetroSA on the rocks for R14.5bn – ParlyReportSA
Chevron loses with Nersa on oil storage – ParlyReportSA

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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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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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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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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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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

Karoo Fracking

Fracking, shale gas gets nearer

Mineral resources gives update on fracking, shale gas

In what appeared to be justification for cabinet’s support of the furtherance of shale gas exploration, director general of the department of mineral resources (DMR), Thibedi Ramontja, told Parliament recently that the discovery of gas deposits in the Karoo “was an exciting opportunity to create jobs and that this was going to make a difference to people’s lives in terms of the NDP”.

He was briefing the select committee on land and mineral resources on the department’s budget vote, his audience representing a different cluster and a more inclusive one than when DMR briefed the National Assembly’s portfolio committee the week before.

Whilst a gazette had been published in February 2014 imposing certain restrictions on the granting of new applications for shale gas “reconnaissance”, DMR said that current approvals did not yet authorise hydraulic fracturing itself.     If this was allowed, “certain amendments” would be made to the appropriate Act.

EIA to come

An environmental impact assessment would be completed in conjunction with the department of water affairs “within the second quarter of 2014/5” to determine “responsible practices” for hydraulic fracturing and to “provide a platform of engagement with stakeholders”.   DMR said that this process would be “streamlined”.

It was noted by DMR in their presentation to parliamentarians that both shale gas exploration and production, together with coal bed methane, will be authorised under environmental impact regulations.

Warning on BEE

The briefing on the DMR strategic plan for five years and this year’s budget vote for the department was preceded by a statement by the deputy minister of mineral resources. Again the warning was conveyed to the mining and petroleum industry that it was generally in default of the mining charter.

With the tenth anniversary of the charter now present, DG Ramontja said, findings by DMR indicated that whilst some targets had been partially achieved in terms of BEE and the charter, others were very much lagging. “Action will be taken”, she said.

Other articles in this category or as background
http://parlyreportsa.co.za//energy/shale-gas-exploration-gets-underway/
http://parlyreportsa.co.za//energy/move-by-minister-to-qualify-shale-gas-exploration
http://parlyreportsa.co.za//energy/fracking-regulations-enhance-safety/

Posted in BEE, Electricity, Energy, Enviro,Water, Facebook and Twitter, Fuel,oil,renewables, LinkedIn, Public utilities, Trade & Industry0 Comments

Medupi is key to short term energy crisis

Eskom bogged down with Medupi …

medupiActing director general of the department of energy (DoE), Tseliso Maqubela, told Parliament before it went into short recess that once Eskom’s new Medupi power station starts supplying the grid the country would have “turned the corner”.

“It is well known we are challenged on electricity”, he said, adding that the fresh view is being taken on the independent system marketer’s operators (ISMO) system which would contribute to recovery in the medium term through the addition of independent power producers (IPPs).

DG of energy policy, planning and clean energy, Ompi Aphane, in his presentation told parliamentarians that, as per the State of Nation Address (SONA), “vigorous attention is now being given to the establishment of the operator’s office to implement independent power supplies.

Financial  certainty, they say

On the subject of infrastructure build generally in the electricity sector, financial certainty was now being restored in the energy industry, Maqubela said, with the result that R120m in energy investment is now planned, “some of which has already come in and projects started.”

The overall plan was to divide power supply between Eskom and IPPs on a 70-30 basis through the national grid by 2020, decisions on refining and gas replacing diesel also being necessary in the short term in terms of a revised energy mix to meet future demand.

Other immediate focus areas for DoE were to increase access to electricity; increase “the momentum” of the installation of solar units; finalise the integrated energy plan; address maintenance and refurbishment programmes; “strengthen” the liquid fuels industry and facilitate decision taken on the nuclear programme.

Interface problems

A major issue being tackled was the in the area of household connections, according to the DoE presentation. Dr Wolsey Barnard, in charge of energy projects and programmes, explained that whilst Eskom was often bringing power to an area, the municipal backbone installations were either not ready or municipal skills were lacking.  DoE had recognised the problem and was busy trying to bridge this gap, he said, with skills training or by working on temporary permissions from municipalities with Eskom assistance.

However, Dr Barnard said it was encouraging that whereas the position ten years ago could have been described as hopeless, the situation was now specific and targeted to small areas, in most cases the most difficult remaining.

At the moment, 1,5m additional households will be connected by 2019 but as this is still insufficient to meet the target of universal electrification by 2025, additional funds are now being allocated by the state and plans made.

Barnard calls for co-operation

In order to achieve this, it was essential, Dr Barnard said, that the modalities regarding national, provincial and local government powers be revised on the ability for Eskom to assist in view of the lack of skills and the handling of appropriation funding.

He called for urgent attention to the fact that power installation funding by DoE to municipalities should be “ring fenced” and accounted for. This area had to be focused upon urgently, he noted.

He said that too many times Eskom had supplied power to an area only to be told by a municipality that there were no funds for distribution boxes or no skilled persons available to connect lines.  Dr Barnard said he was aware that the economic planning department were “in the picture” and legislation was planned despite the constitutional barriers but again he wanted to emphasise that this issue had to be resolved urgently.

EFF members asked if there were plans to specifically assist the unemployed with electricity connections and wanted a list of all power cuts to the different areas and the reasons for these.

Priorities from both sides

ANC member Ms Makwbele-Mashele asked the DG that with all the emphasis on “greening”, the high cost of gearing industry to meet new emissions and pollutants standards and the recently introduced air quality regulations, whether in his opinion these issues were hindering the country’ energy and industrial development.  The ANC also asked, as the fuel price seemed to be “out of our hands”, whether Sasol could increase production locally.

The DA wanted more detail on the exact steps at present underway to increase co-generation of energy to solve the immediate energy crisis.   This was in the light of the fact that the ISMO process had initially failed simply because DoE could not foresee the end state of independent power production, they said.    They also felt that a paper was needed to get clarity on how the integrated energy plan and the integrated resources plan locked into the NDP.

The DoE promised to respond to MPs questions in writing through the chair as the minister of energy had taken up most of the debating time available.

Other articles in this category or as background

  • http://parlyreportsa.co.za//bee/electricity-connections-target-far-short/
  • http://parlyreportsa.co.za//energy/electricity-tariffs-billiton-tells-its-side/
  • http://parlyreportsa.co.za//uncategorized/major-metros-open-up-on-electricity-tariffs/
  • http://parlyreportsa.co.za//energy/eskom-issues-alerts/

Posted in cabinet, Electricity, Energy, Facebook and Twitter, LinkedIn, Special Recent Posts0 Comments

New minister focuses on Eskom strategy

Eskom strategy goes to economic cluster

In the light of recent Eskom rolling blackouts, new minister of public enterprises and past Western Cape premier, Lynne Brown,  promised that Eskom will have a “comprehensive sustainability strategy” submitted to the newly appointed economic cluster by the end of June, this cluster including new finance minister, Nhlanhla Nene, and new energy minister, Tina Joemat-Pettersson.

The arrival of such a report on his desk has not confirmed in any way by minister Nene in recent statements regarding the budget vote.

Despite the Eskom complaint that it is on the receiving end of a R225bn revenue shortfall for the current multi-year determination tariff (MYPD) for 2013 and 2018, fixed at 8% by the regulatory authority Nersa instead of the 16% asked for by Eskom, it might appear that the electricity giant has successfully prevailed upon Nersa for a further 5% effective after only one year of the new tariff structure from comments during portfolio committee meetings during the new Parliament’s first few weeks.

We told you so

Eskom’s new sustainability programme will include new funding options, acting CEO Collin Matjila has said, but funding aspects will no doubt be affected by the recent downgrade in ratings, a fear of this being expressed in the appeal against the Nersa award played out by past CEO Brian Dames in the parliamentary energy and public enterprises portfolio committees last year.

Fitch, as quoted recently by Reuters, noticeably excluded energy sustainability issues as the reason for downgrading but indicated that it was more the result of mining labour unrest and manufacturing index dips. Now, the IMF has commented unfavourably on SA’s economic growth and whilst again no fingers were specifically pointed at energy shortages, it is acknowledged by most commentators that international funding requirements will not benefit from such sentiments.

IEP needed

In addition to financial sustainability issues, Eskom says also it needs to know soon the final findings of the integrated energy plan being finalised so as to complete its own future strategies, some clue having been provided by the new Gas Plan recently published by DoE.

Minister Lynne Brown said the matter was indeed her priority to get such strategies to cabinet whilst at the same time she needed time to acquaint herself with all outstanding issues in her new cabinet post.

Other articles in this category or as background
http://parlyreportsa.co.za//parliament-sa-this-week/cabinet-fifth-sa-parliament/
http://parlyreportsa.co.za//energy/eskom-taking-sa-to-the-edge-eiug/
http://parlyreportsa.co.za//energy/eskom-the-elephant-in-the-room/
http://parlyreportsa.co.za//energy/eskom-determined-to-sustain-mypd-asking-price/

Posted in cabinet, Electricity, Energy, Facebook and Twitter, LinkedIn, Mining, beneficiation, Public utilities, Trade & Industry0 Comments

IRP energy plan calls for less capacity

IRP plan now out and public comment called for…..

The Department of Energy (DoE) has called for public comment on the much talked about Integrated Resource Plan (IRP) clarified as being for the period 2010-2030

Commentators have noted, that the final IRP plan anticipates that 6 600 MW less capacity will be required by 2030 than originally thought. This has led many into thinking that DoE may delay, once again, impending decisions regarding the proposed nuclear build programme but ,in the State of Nation Address (SONA), President Zuma,was clear that provision was to be made for a nuclear development  but gave no dates.

The comment period on the final IRP closes in early February and DoE, in their statement and notice, says “the responses will be used to inform a final draft to be submitted to Cabinet by March 2014.”

The report finally updates the original IRP of 2011 and takes into account SA economic growth patterns; renewable energy contributions; possible changes to the electricity market and sourcing of energy.

Peak demand expectations less

A demand projection for 2030 is made which is considerably lower the 2011 peak demand but the new document notes that “from a peak demand perspective, this means a reduction from 67 800 MW to 61 200 MW (on the upper end of the range), with the consequence that at least 6 600 MW less capacity is required.”

In addition, the update still uses the National Development Plan’s economic growth target of 5.4%, meaning that as things stand at the moment, demand projections could be reduced even further amounts unless there is a considerable change in South Africa’s economic fortunes.

This has led to many projecting that any nuclear decision will possibly be delayed, further supported by the fact that the new IRP  suggests that no new nuclear baseload capacity is required until after 2025 in any case.

Nuclear development in conflict with SONA

The 1,100 page report suggests that the country should not “prematurely” commit to a technology that may become “redundant” if electricity demand expectations do not materialise. Under such low demand growth conditions, the update does not foresee a need for nuclear baseload until after 2035.

The document also favours a procurement programme launched for between 1 000 MW and 1 500 MW of “fluidised bed combustion coal plants, based on discard coal” which is completely unlike the current coal inputs from Medupi or Kusile. It supports “stepping up” exploration for shale gas in South Africa.

The possibility of enlarging the current Eskom power station configuration with the building of new, more efficient coal-fired plants are debated and the new IRP plan calls for “flexible decision-making in favour of decisions of least regret” which means, according to the DoE IRP compilers, of avoiding “commitments to long range, large-scale investment decisions”.

Play it as you go along, seems to be the theme of the new IRP. Maybe the plan is to sell energy to the North.

Previous articles on this subject
http://parlyreportsa.co.za//cabinetpresidential/energy-resources-doing-it-better-and-quickly/
http://parlyreportsa.co.za//energy/nuclear-gas-workshop-meeting/
http://parlyreportsa.co.za//energy/integrated-energy-plan-iep-around-corner/

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Eskom looks at cutbacks, maybe rebates

Eskom reviews whole process of rebates…

eskomEskom has placed its energy efficiency rebates for businesses and homes on hold pending a review of financial constraints after being with left with , the spokesperson says, a shortfall of R7.9bn when granted the third Multi-Year Price Determination (MYPD) period until 2018. All this compared with the R13.09bn it sought.

The review to curb on costs would affect new projects that were to be implemented in the next financial year and a review is being conducted on present rebates.

Cannot maintain “aggressive” style

As part of a programme of cutbacks, new general manager Andrew Etzinger has confirmed that the lower-than-applied for funding meant that Eskom could not sustain such an “aggressive programme” at the same levels whilst, he said the group was in discussions with government on alternative funding models.

Etzinger stated that the benefits of current integrated demand management (IDM) programmes were obvious and such interventions had assisted with the country’s power situation. With savings of about 3 600 MW since inception, the IDM programmes have established capacity in megawatt equivalents, to an average power station. Without those savings, South Africa would have been in daily load shedding since 2008, Etzinger said.

Energy targets outlined

In the MYPD2 period, Eskom spent R5.4-billion on the current IDM interventions and achieved savings of 1 200 MW over the three-year period. For the current financial year, Eskom is aiming to achieve savings of 379 MW through energy efficiency interventions and is targeting 240 MW in the next financial year. Hence the cut backs, he said.

Eskom says, “The residential mass roll-out was the largest contributor to demand savings in the 2013 financial year. The programme is based on a free bulk roll-out of a “basket of technologies”, focusing on replacing inefficient lighting and implementing energy saving technologies and load control devices in the residential sector.”

Since inception in October 2011, about 245 projects have been registered for the standard offer, realising demand savings of 118 MW and energy savings of 478.6 GWh. More than 4 800 projects have been registered for the standard product programme, which started in January 2012, realising demand savings of 122.7 MW and energy savings of 555 GWh.

Presumably Eskom with its current statement means that any new programmes will not be started and it will review current arrangements.

Etzinger stressed, however, that while the IDM interventions were temporarily on hold, Eskom would continue to benefit from the savings achieved through the projects that are implemented on an ongoing basis with agreement with the parties involved.

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Electricity connections not making targets

No hope of meeting Zuma’s promises…

elec poleThe inability of municipalities and local government to bring electricity to the poor and for the department of energy (DOE) to meet its promised target of electricity to all households by 2015 was a subject which dominated the DOE’s annual report to Parliament recently. New Minister of governance and traditional affairs, Pravin Gordhan, will have this issue before him as he tackles local government problems as will new minister of public enterprises, Lynne Brown.

Ms Nelisiwe Magubane, DG of DOE was reporting on the activities of her department for the 2o12/13 period and neither the minister of energy, Ben Martins, or his deputy, was present, much to the chagrin of portfolio  committee energy committee chairperson, Sisi Njikelena, who reported angrily on the subject.      DOE was reporting on its annual report and second quarter achievements.

Success with avoiding Middle East for oil

In noting that the year had been dominated by fluctuating oil prices, Ms Magubane noted that South Africa had succeeded in switching 41% of its oil imports to the African continent.

DG Magubane also reported that the electricity supply situation had improved in the country and the department’s own household electricity connection programme had also improved, mainly thanks to Eskom, but there was a large backlog that still existed due to lack of accountability by municipalities. This was a worrying factor for the country, she said. On this subject, further reports followed.

Other DOE targets met

Dr Barnard

Dr Barnard

On clean energy as far as the year was concerned, she reported that in August financial close had been received from twenty eight of the independent power producer (IPP) bids: the biofuels blending regulations had been drafted; the draft pricing arrangements started; and a nuclear safety report compiled and submitted as a result of lessons learnt from the Fukushima disaster.
 Dr Wolsey Barnard took up the issue of DOE’s poor record on electricity connections and said that bearing in mind the lack of skills and training at local government, it “was a miracle that South Africa had achieved so much”.

Aside from the fact, he said, that the government financial year was different to the municipal year, which made a mockery of funding programmes and targets, he said dealing with municipalities was “extremely difficult”  but nevertheless “for each seventy seconds of each day there was a connection some here in South Africa”.

Treasury must ring fence local funding

On the problematic relationships with local government, Dr Barnard said DOE was doing as much as it could “but you can pull a rope but you can’t push it and that was the trouble in dealing with local government officials”.   He said he looked forward to the day when National Treasury’s promised Bill “ring fencing” funds was promulgated “and then we might get somewhere”, he said.

He noted that each municipality had to sign a contract to get funding in the first place, providing business plan, “but sometimes we get to a place to install for a lot of homes built and there is no sub-station or any hope of connecting to the national grid”.

Cabora Bassa dam debt at R1

nelisiwe magubaneMs Magubane confirmed that in the annual reports a loan to Mozambique for the Cabora Bassa dam had been written down to R1 with the permission of Treasury. This loan was in respect of money loaned in the ‘sixties and it was clear that the Mozambique government could not pay. However, the question of re-payment of this loan would be re-raised, she said.

On queries why there seemed so little interest in gas exploration by government in Mozambique, whereas other countries seemed to have “got their foot in first”, Muzi Mkhize, chief director of hydrocarbons, said that “unlike other countries, we do not subsidize our national oil exploration effort and, in any case, the quest of dealing with countries was a foreign affairs matter and country to country relationships had to come first.”

SA to meet Mozambique on gas exploration

Sisi Njikelana said that this was a totally unsatisfactory answer and called on Mkhize for a better explanation to his committee.  Mkhize admitted that South Africa was “meeting Mozambique on a government to government basis on gas exploration matters in mid-October”.

When asked what had happened to the nuclear safety report, deputy director general of nuclear, DOE, Zizamele Mbambo, said that this was a security document but it had been acted upon.

The Eskom representative was asked to speak on the subject when a question was raised about the Koeberg Nuclear plant by a Cape Town MP, and the Eskom official reported that a “fortnightly nuclear safety committee met in the area with all representatives present” and that the meeting was chaired by a person drawn from the local community.

Refer to articles in this category
http://parlyreportsa.co.za//public-utilities/municipal-free-basic-services-slow-build/
http://parlyreportsa.co.za//energy/dpe-

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Integrated energy plan (IEP) around the corner

IEP a few months off

Benedict MartinsAn integrated energy plan (IEP) for South Africa covering the full energy spectrum will definitely be published before the year end, according to the director general, department of energy (DOE), a fact also confirmed by minister Ben Martins when addressing an energy conference in Johannesburg recently.

Ms Nellie Magubane, when addressing the relevant portfolio committee under chair, Sisi Njikelana who had called for an update on the energy plan, was accompanied by minister Ben Martins at the time and present for his first meeting in Parliament. The minister acknowledged and highlighted the importance of unfolding the plan as part of the country’s investment credentials as soon as possible.

Continuing energy story

Whilst re-confirming that the strategy was still at public participation stage, DG Magubane said there was “no end-state tomorrow” with the plan but rather a reflection of a “phased approach as the country’s appetite for energy as it  develops”.

The process began, she said, with the 1998 White Paper, the development of independent powers system operators (ISMO) and the accompanying ISMO Bill also awaiting the production of the IEP, the National Energy Act in 2008 and regulations on resources that have followed. The IEP this year would start the energy initiative rolling to be followed by gas development plans.

Not just supply factors

In the years since apartheid, said Magubane, when energy had different directives which were focused primarily on just maintaining supply, what had changed significantly were economic, environmental and social imperatives which now were being drawn in and superimposed. “The fixation with supply capacity is not now the only criteria to be considered in the energy paradigm”, she said.

The liquid fuels shortages of 2005 and subsequent electricity disruptions in the years up to 2008, Magubane said, had shown the need for coordinated planning to avoid disparate plans and contradictory initiatives in the sectors of electricity, liquid fuels and gas.

A twenty-year road map for the liquid fuels industry was in progress by the department, she said, and a gas planning infrastructure plan was to be developed once the extent of resources were better understood.

International view

Through time, and above all because of energy security, Magubane said, scenario planning has changed in South Africa to take in security, environmental and climate response factors. In conjunction to long-term climate change policy and agreements, lessons had been learnt from the IEA, Austria, Belgium, Canada, the Czech Republic, Italy, Japan, the Netherlands, Norway and Spain, she said.

When asked what had been learnt from a study tour of the USA, DG Magubane said that the primary aspect learnt there was the success of establishing localised energy resources, focusing on what mattered most to the USA and reducing dependence on imports. We learnt, for example, that we must not try a change the impossible or employ unrealistic factors but move according to what was a fact locally. “For example, South Africa has a lot of coal but little water and these factors have to be built in, not ignored.”

She said that the overseas studies where different economies and different state policies were involved, due note that the position had changed radically in South Africa had to be acknowledged, as had been the case in many of those countries.

Control of resources

“For example, government has come from a position where in SA we were determining the appropriate level of involvement with the liquid fuel levels industry during transition to a rapidly globalising picture, to now having to maintain a strategic role in shaping all key sectors of the economy.”

In response to queries from parliamentarians, she acknowledged that the IEP to be produced would not incorporate any powers to the minister, who “would rather be able to exercise any powers affecting energy matters through normal regulatory enforcement contained in the many pieces of legislation that applied to the energy sector, such as the Energy and Gas Acts.”

Pricing restructuring

On pricing issues as far as the IEP was concerned, Ms. Magubane responded to questions that national treasury figures had so far been the base of determinations but in the light that submissions and input from stakeholders which were to emerge from the process now in progress, the issue of price factors could in all probability be reshaped.

In answer to complaints that that there was still no indication from her, or DOE, where the country was going in hydrocarbons, electricity or renewables and what pricing factors were involved for urgent investment needs, the chair asked that DOE be given time to develop the final report or “everything would go in different directions”.

DG Magubane assured parliamentarians that the final plan would enable everybody to weigh up infrastructure plans with government policy, even bearing in mind that the position is constantly changing given such issues as hydro input from neighbours, gas exploration in various forms and global tensions.

previous articles on this subject
http://parlyreportsa.co.za//uncategorized/mineral-and-petroleum-development-bill-grabs-resources/
http://parlyreportsa.co.za//cabinetpresidential/president-obama-and-power-africa/
http://parlyreportsa.co.za//cabinetpresidential/nuclear-goes-ahead-maybe-strategic-partner/
http://parlyreportsa.co.za//energy/petrosa-has-high-hopes-with-the-chinese/

Posted in Electricity, Energy, Facebook and Twitter, Finance, economic, Fuel,oil,renewables, LinkedIn, Mining, beneficiation, Public utilities, Trade & Industry0 Comments

Illegal diesel coming in from Mozambique

DOE working with customs……

Department of energy (DoE), admitted to the portfolio committee on energy that they knew of illegal diesel fuel imports emanating from Mozambique and that the department was working with customs and excise officials to track down culprits. DoE was reporting on its third and fourth quarter performance figures.

DoE confirmed that in many cases tanker transport was being used and in most instances the fuel itself was sub-standard, sometimes being a mixture of diesel and other fuels such as paraffin. Most of the fuel was being offered to farmers at cheap rates.

The subject arose when Mr L Malaudzi, acting chief operating officer, was outlining to members many of the issues involved in DoE’s programmes on governance and compliance. He explained the department’s inability to hold a planned anti-fraud workshop due to time constraints and other more pressing issues but promised that such a workshop would be conducted in the first quarter of 2013/4 and he would call stakeholders.

Focus point Mpumalanga

Questions arose from opposition members that fuel was being offered for sale in some areas of Mpumalanga from such sources. Tseliso Maqubela, deputy director general, confirmed that DoE was aware of such incidents and that the department of customs and excise had many problems with goods passing through this “porous border” nearby and that cheap and sometimes “dirty” fuels were on the list of issues.

Maqubela confirmed in his report to parliamentarians on petroleum regulations during the final quarter of 2012/3, that 92 site inspections over and above the target of 1500 sites had been completed but that no fuel sample testing was conducted due to a lack of budget for this function. This subject was to be deferred to next year, he said.

No budget to investigate

In discussing fuel specifications generally, Maqubela confirmed that DoE would “speak to industries to see if we can re-prioritise the matter”. He did not elaborate on this as to whether he was talking about capital projects or fuel mixes generally. He said, however, that on border transfers, particularly by road, had to be investigated and a budget of R50m had been requested next year from the fiscus to follow up on this. At the moment, only diesel imports were being followed up in investigations, such investigations also being limited.

On fuel pricing generally, he said that a desk top study on basic fuel pricing (BFP) was being undertaken, the stakeholder discussion portion of the study having been completed in March of this year.   BFP was a major issue nationally at the moment, he said, as were various items that went to make up its structure. He hoped that most of the issues would be resolved with stakeholders towards the end of this year.

Crude oil priorities

On existing crude oil matters, Saldanha, Milnerton and Durban were the current priority areas at the moment for infrastructure development, he said, and whereas before 28% of crude imports came from Iran, he said, “We haven forced to diversify which is exciting because it introduces the issue of African trade”.

The US is now producing considerable quantities of light crude which again has reversed trends and “there is an opportunity for Africa, particularly Angola and Nigeria, to deal with us and take up slack.”

Clean energy savings

On clean energy issues, Ompi Aphane, deputy director general, said that that so far major savings in terms of the municipal energy saving plan had been recorded with fifteen of the twenty eight participants in the DoE programme having registered savings, which Aphane said had translated into some R37m a year and 31,000MWh to the national grid.

However, he reported that the intended strategy plans for biomass, biogas and biofuels had got nowhere and DoE were looking at taking away from SANEDI the responsibility for this undertaking.

Posted in Fuel,oil,renewables, Justice, constitutional, Public utilities, Trade & Industry, Transport0 Comments

CEF still has its troubles

CEF subsidiary SASDA faces closure

Reporting under the Central Energy Fund label during parliamentary presentations to the portfolio committee on energy, the South African Supplier Development Agency (SASDA) admitted that in incurring a loss of over R18m during 2011/12 and a loss estimated at R14.5m for the present year, shutdown or liquidation was inevitable.

Lunga Saki, acting CEO, said the situation had become untenable.

He described SASDA as the “driving force behind the liquid fuels charter” but that SASDA, with dwindling cash reserves and with CEF “having insufficient dividend flows from subsidiaries” had put tremendous pressure on SASDA’s ability to continue its work, funding for which at present existed as loans from the central group.

Directors anxious to resolve

CEF had said that as a body it was to approach the department of energy and industry players such as SAPIA on the future of SASDA.  A possible liquidation was on the books, since the directors of SASDA did not want to enter the realm where they, knowing that SASDA had liabilities which exceeded its assets, could be accused of reckless trading and SASDA receiving qualifications from the auditor general with them at the reins.

SASDA focused on mentoring and coaching, providing technical support, skills training, facilitated access to raw materials, project management and they claimed facilitated financial support to CEF projects.

General picture

Sizwe Mncwango, CEO of CEF, in reporting to Parliament on overall group activities, excluding that of subsidiary PetroSA which in view of its size and structure reported separately, said he would focus on the work of CEF excluding this

CEF was in the process of restructuring for growth, he said. He saw the group as contributing to national security of energy supply dealing in renewables, oil and gas, strategic storage, licencing, mining development projects and supplier development issues within the energy field.

In clean energy, CEF’s project at Solar Park had a mission of developing renewable energy and low smoke fuel projects and agreements for solar water heaters had been signed in cooperation with the departments of human settlements and energy. Their second phase of this successful project was about to start. Photovoltaic (PV) manufacturing was being investigated.

Strategic stocks

On strategic stocks and storage facilities the company stored and managed third party crude oil on a commercial basis in order to fund the oil pollution prevention and control activities at the Saldanha Bay, Milnerton and Ogies facilities. There was a major project which included office refurbishment at the Milnerton Tank Farm, with tank refurbishment being undertaken with more sourcing of additional strategic stock tanks required.

A warning was given that the oil pollution sea vessels were aged and the fleet was urgently in need of refurbishment.

David Van Der Spuy, acting general manager at the Promotion Petroleum Agency South Africa (PASA), explained to parliamentarians the implication  of section 71 of the Mineral and Petroleum Resources Development Act (MPRDA) on the need to promote onshore and offshore exploration and production of petroleum, monitor and report regularly to the Minister in respect of compliance on permit, rights and licensing.

PASA faced a funding problem, he said, but the regulation of MPRDA remained an imperative and could not be threatened.

CEF coal venture

CEF also reported on its small coal mining venture at Vlakfontein, Mpumalanga, run by a subsidiary African Exploration Mining and Finance (AEMFC) which amounted to a pilot development and which was successfully mining 1.5m tons of coal, with no fatalities.

This financed a mining exploration venture known as Pan African Minerals Development Corporation (PAMDC and was driving PAMDC’s additional coal exploration programme. CEF investments shareholding in PAMDC was 33.3%, AEMFC being a 49% participant at project level but the group was searching for third party funding to hive the project off and engagement with the department of mineral resources was positive.

Sizwe Mncwango told parliamentarians that this was the main objective of CEF in building successful energy participants and letting them flourish on their own, once identified as a successful participants in the energy environment

PetroSA a separate issue

Such was the case with PetroSA, a part of CEF, who would report to Parliament in their own right, Mncwango said.

On questioning it became clear that, aside from the SASDA problem, much of the focus on the balance sheet had been in the creation of loans and funding for PetroSA. Consequently CEF, other than certain mandates such as that retained by PASA in licensing and oil spillage, was mainly involved in support programmes, skills development and sustainability of projects which involved the state’s drive to make contributions in the energy field.
Associated articles archived
http://parlyreportsa.co.za//uncategorized/central-energy-fund-slowly-gets-its-house-in-order/

 

Posted in Energy, Finance, economic, Fuel,oil,renewables, Labour, Public utilities0 Comments

Sanedi plans for a low carbon future

Carbon capture drilling underway….

SANEDI (SA National Energy Development Institute) was a “catalyst” for South Africa in the development of clean energy technologies and was this year spending, said its CEO, Kevin Nassiep, some R69m on its carbon capture project with drilling operations in the Eastern Cape, near Port Elizabeth.

It was also deploying R71m developing a business case and development plan for “smart grids” in South Africa incorporating clean energy into local energy uses.

Working with gas and cars

Other projects were its co-ordination programme with department of energy on the possibility of shale gas in the Karoo and the development of the electric car with the “green car” programme based out of Pretoria. On energy saving, SANEDI said it was working with PetroSA.

Nassiep said, when it came to each project the country wanted to involve itself in, South Africa had to decide first whether it was better to be an innovator, even an inventor, with the creation of a new technology: whether it was better to be a late follower of something that was recent and to add value or “localise” the project, or whether it was simply best to be a buyer of existing energy technologies or products straight from the product shelf.

In the case of carbon capture, SANEDI was either a developer and leader or could add value to what it existed elsewhere adding to its own knowledge. By the end of the year SANEDI could make a final assessment and take the right course on carbon capture.

Funding from overseas

To this end, SANEDI was working with various portions of SA industry; the Norwegian government and had access to the ₤25m fund that the UK government has placed in the World Bank Carbon Capture and Storage Trust Fund.

Members asked why ethanol gel could not be sold and developed as a low cost energy fuel rather than say, LP gas.    SANEDI responded with the answer that in their view it was a question of consumerism. Whilst ethanol gel could be much safer, it would not land up cheaper or more available until products that used it had been developed and a market demand had been developed.

It was the same with the electric car, Nassiep said.    It had to be at a good price, conveniently refueled or re-charged, safe and highly preferred in the market place.

(The writer asked Kevin Nassiep if he thought or if there had been any discussions that any funding for carbon capture drilling might come out of a “ring fenced” fund from a possible carbon tax but he said that he, SANEDI or even CEF would not have the slightest idea on this. Only treasury, he commented personally, would have any insight on this.)

Associated articles archived
http://parlyreportsa.co.za//uncategorized/sanedi-to-become-a-force-in-energy-research/
http://parlyreportsa.co.za//uncategorized/carbon-capture-storage-technology-underway-in-sa/

Posted in Energy, Enviro,Water, Health, Mining, beneficiation, Public utilities, Trade & Industry0 Comments

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