Tag Archive | fuel blending

Biofuels development stays in limbo

Nobody building

sorghumIn a major presentation by the department  of energy (DOE) it became quite evident that governments biofuels strategy was still only a theory and whilst eight biofuels projects had licences either granted in principle or issued in practice, not one plant has yet gone into the building phase to meet government’s target of creating an estimated 25,000 jobs.

Ms Mokgadi Modise, chief director of clean energy at DOE, told the portfolio committee on energy up front that it was acknowledged by DOE that South Africa’s biofuels strategy could not get off the ground unless the state came up first with clear policy regulations and incentives to industry.

Big plans for 2013

Nevertheless, entrants to the industry that had indicated a firm commitment to the biofuels production had provided a cumulative figure to DOE that would exceed the 2013 target they had originally envisaged of some 400m litres, about 2% of the national fuels pool.

She said that whilst this was an encouraging start, there was little hope of any target date being met primarily because no support mechanisms from Treasury were yet put out; no regulations or pricing mechanisms had been established but only talked about and government was still undecided on blending options – the most suitable crops being mainly sorghum, soya, sugar and canola.

Blending issues

The minimum blending level of 5% biofuels into conventional diesel and petrol were set last year, in a gazette published accordingly, she said.

Currently, Modise said, DOE acknowledged that bio-ethanol falls outside the fuel tax net but bio-diesel, if supplied, would not, although manufacturers, would receive their 50% from the fuel levy in this case. Blending options were the six refineries in South Africa and at all the fuel depots, which amounted to 2 large depots for each of the seven oil companies.

Having heard their options, it was assumed by DOE that two of the companies would blend at their refineries and the balance of oil companies would blend at their depots. She gave no names.

On capital investment by the oil companies, she noted that R278m would have to be spent on refinery blending for this to be possible and a minimum of R460m on depot blending.

Looking outside SA

Parliamentarians noted that satisfactory diversification processes seemed to be going on in the liquid fuels industry and there were obviously attempts to create sustainable jobs but they asked what export markets were being created and how was the product going to be transported.

Modise said these issues had not yet been explored by DOE but she needed a joint meeting with the departments of science and technology, the department of agriculture including water department and treasury officials present before any such questions could be answered.

She said feasibility studies were being conducted with the refinery companies in order to establish whether or not they would “buy in” and that the department of science and technology were to supply their research findings by 31 March. A decision had to be taken by the same date on whether or not to exclude maize as a permitted feedstock.

Treasury answers needed

In answer to questions on financing, Modise said that IDC had put R1.5m aside for support but treasury needed play out its support programme on incentives and might make a statement before the national budget took place.

Parliamentarians said that if jobs were to be created in the right areas then Modise and DOE had to ensure that any such incentives must speak to the issue of distance from the market place if growth of agriculture in the “homelands” areas was to be encouraged. Modise said that was the kind of question that DAFF and treasury had to get together on.

On the one major biofuels plant that had been in the newspapers, namely the Craddock facility which had IDC backing, Modise said it still only had a conditional “granted” licence as not all requirements, mainly financial, had been met in order to issue a licence – only a temporary “granting” being considered. There was also a well-developed plan in Port Elizabeth but this was still on hold. A “granted” licence was a strong indication but an “issued” licence gave the right to operate.

Things too vague, says chair

In conclusion, chair Sisi Njikelana said there must be immediate follow up by Parliament on the whole issue of biofuels since DOE had to get beyond just local strategy and move towards the creation of an enabling environment. He had no sense, he said, on finality on manufacturing possibilities or issues, or even a road map on what was happening generally.

Modise responded by saying that DOE needed certain  “triggers” at the stage to happen; for example for the government needed to start talking to SADC for a start to see if the country really should be really working to just a 2% figure of the local market alone; treasury and particularly  agriculture had to provide clarity on policy; and technical issues under debate had to be finalised.

Feedstock,incentives,transport et al

Lance Greyling of the ID said the possibility of creating thousands of jobs in the biofuels industry had started in 2007 and there was still an air of frustration and expectation.   He told DOE that whilst it may seem possible to exceed the originally set target of 400m litres a year, the security of supply of feedstock was still a worrying issue, as was transport to manufacturing points and a proper tax incentives plan, including recovery cost factors to the liquid fuel companies.

Much more work had to be also with the department of rural development and land reform as well, he said, on the issue of getting small holders being able to get crops as well to their market in order to assist in rural development.  The implementation of the whole biofuels strategic plan was far too slow, he said.

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


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