Tag Archive | gas

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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Marine Spatial Bill targets ocean resources…

Bill to bring order to marine economy…

In the light of President Zuma’s emphasis in his recent speeches on oil and gas issues, it is important to couple this in terms of government policy with the tabling of the section 76 Marine Spatial Planning Bill (MSP Bill).  The proposals are targeted at business and industry  to establish “a marine spatial planning system” offshore over South African waters.

The Bill  also says it is aimed at “facilitating good ocean governance, giving effect to South Africa’s international obligations.”

A briefing by the Department of Environmental Affairs (DEA) on their proposals is now awaited in Parliament. The Bill until recently was undergoing controversial hearings in the provinces as is demanded by its section 76 nature.

Water kingdom

The MSP Bill applies to activities within South Africa’s territorial waters known as Exclusive Economic Zones, which are mapped out areas with co-ordinates within South Africa’s continental shelf claim and inclusive of all territorial waters extending the Prince Edward Islands.

The Bill flows, government says, from its Operation Phakisa plan to develop South Africa’s sea resources, notably oil and gas.   The subject has recently been subject to hearings in SA provinces that have coastal activities. This importantly applies to South African and international marine interests operating from ports in Kwa-Zulu Natal and the Eastern and Western Cape but also  involves coastal communities and their activities.

International liaison

Equally as important as maritime governance, is the wish to assist in job creation by letting in work creators.  Accounted for also are international oceanic environmental obligations to preserve nature and life supporting conditions which DEA state can in no way can be ignored if maritime operations and industrial seabed development are to be considered.

South Africa is listed as a UNESCO participant, together with a lengthy list of other oceanic countries, agreements which, whilst not demanding total compliance on who does what, are in place to establish a common approach to be respected by oceanic activity, all to be agreed in the 2016/7 year.  South Africa is running late.

Invasion protection

Whilst the UNESCO discipline covers environmental aspects and commercial exploitation of maritime resources, the MSP Bill now before Parliament states that in acknowledging these international obligations, such must be balanced with the specific needs of communities, many of whom have no voice in an organised sense.

As Operation Phakisa has its sights set on the creation of more jobs from oceanic resources therefore, the MSP Bill becomes a balancing act for the Department of Environmental Affairs (DEA) and the Bill is attracting considerable interest as a result.

The hearings in the Eastern Cape have already exposed the obvious conundrum that exists between protecting small-time fishing interests and community income in the preservation of fishing waters and development of undersea resources.  What has already emerged that the whole question of the creation of future job creation possibilities from seabed-mining, oil and gas exploration and coastal sand mining is not necessarily understood, as has been heard from small communities.

The ever present dwindling supply of fish stocks is not also accepted in many quarters, with fishing quotas accordingly reduced.

Tug of war

All views must be considered nevertheless but from statements made at the political top in Parliament it becomes evident that the potential of developing geological resources far outweigh the needs of a shrinking fishing industry.  At the same time, politicians usually wish to consider votes and at parliamentary committee level, the feedback protestfrom the many localised hearings is being heard quite loudly.

As one traditional fishing person said at the hearings in the Eastern Cape, “The sea is our land but we can only fish in our area to sustain life. The law is stopping us fishing for profit.”

Local calls

The attendees at many hearings have said that the MSP Bill and similar regulations in force restrict families from earning from small local operations such as mining sand; allow only limited fishing licences and call for homes to be far from the sea denying communities the right to benefit from the sea and coastal strips for a living.

Hearings last went to the West Coast and were held with Saldanha Bay communities.

Big opportunities

Conversely, insofar as Operation Phakisa is concerned, President Zuma, as has been stated, said clearly in his latest State of Nation AddressZuma that government has an eye for much more investment into oil and gas exploration.   He has since announced that there are plans afoot to drill at least 30 deep-water oil and gas exploration wells within the next 10 years as part of Operation Phakisa.

Coupled to this is the more recent comment in Parliament that once viable oil and gas reserves are found, the country could possibly extract up to 370 000 barrels of fossil fuels each day within 20 years – the equivalent of 80% of current oil and gas imports.

According to the deadline set by the Operation Phakisa framework, the MSP Bill should have been taken to Parliament at the beginning of December 2016 for promulgation as an Act by the end of June 2017, making it appear that things are running late.

Environmental focus

As the legislation is environmentally driven, with commercial interests coming to the surface in a limited manner at this stage, the matter is being handled by the Portfolio Committee on Environmental Affairs.    It is understood that later joint meetings will be held with the Trade and Industry Committee and with Energy Committee members.

Adding to the picture that is now beginning to emerge, is the fact that Minister of Science and Technology, Naledi Pandor, has signed a MOU with the Offshore Petroleum Association of South Africa.

Minister Pandor said at the time of signing, “The South African coastal and marine environment is one of our most important assets.   Currently South Africa is not really deriving much from the ocean’s economy. This is therefore why we want to build a viable gas industry and unlock the country’s vast marine resources.”

Moves afoot

OPASA is now to make more input with offshore oil and gas exploration facts and figures.   Energy publications are now bandying figures around that developments in this sphere will contribute “about R20bn to South Africa’s GDP over a five-year period.”   If this is the case, the Energy Minister might be compromised once again, as she was with renewables, on the future makeup of the planned energy mix.

Amongst the particularly worrying issues raised by opposition parliamentarians and various groupings in agricultural and fishing areas is that there is a proposal in the MSP Bill on circuit states that the Act will trump all other legislation when matters relate to marine spatial planning. DEA will have to answer this claim.

Opposition

Earthlife Africa have also stated at hearings in Richards Bay that in their opinion “Operation Phakisa has very little to do with poverty alleviation and everything to do with profits for corporates, most likely with the familiar kickbacks for well-connected ‘tenderpreneurs’ and their political allies.”

This is obviously no reasoned argument and just a statement but gives an indication of what is to be faced by DEA in the coming months.

Giants enter

With such diverse views being expressed on the Bill, President Zuma and past Minister  of Energy, Mmamaloko Kubayi cannot have missed the announcement that Italy’s Eni and US oil and gas giant, Anadarko, have signed agreements with the Mozambique government to develop gas fields and build two liquefied natural gas terminals on the coast to serve Southern African countries.

Eni says it is spending $8bn to develop the gas fields in Mozambique territorial waters and Anadarko is developing Mozambique’s first onshore LNG plant consisting of two initial LNG trains with a total capacity of 12-million tonnes per annum.  More than $30bn, it has been stated in a joint release by those companies, is expected to be invested in Mozambique’s natural gas sector in the near future.

Impetus gaining

In general, therefore, the importance of a MSP Bill is far greater than most have realized. The vast number of countries called upon to have their MSP legislation in place also indicates international pressure for the Portfolio Committee on Environmental Affairs to move at speed.

This follows a worldwide shift to exploiting maritime resources, an issue not supported by most enviro NGOs and green movements without serious restrictions.  Most parliamentary comments indicate that the trail for oil and gas revenues needs following up and the need to create jobs in this sector is even greater.

Ground rules

Whilst the oil and gas industry and the proponents of Operation Phakisa also recognize that any form of MSP Bill should be approved to provide gateway rules for their operations and framework planning, the weight would seem to be behind the need for clarity in legislation and urgency in implementation of not only eco-friendly but labour creating legislation.

Operation Phakisa, as presented to Parliament particularly specified that the development of MSP legislation was necessary and Sean Lunn, chairperson of OPASA has said that the Bill will “add tangible value to South Africa’s marine infrastructure, protection services and ocean governance.”  He said it will go a long way in mitigating differences between the environmentalists and developers.

Not so nice

On seabed mining, the position with the MSP Bill is not so clear, it seems.    Saul Roux for the Centre for Environmental Rights (CER) says that the Department of Mineral Resources granted a few years ago three rights to prospect for marine phosphates.

He also stated that the marine process “involves an extremely destructive form of mining where the top three metres of the seabed is dredged up and consequently destroys critical, delicate and insufficiently understood sea life in its wake.”   Phosphates are predominantly used for agricultural fertiliser.

“These three rights”, he said “extend over 150,000 km2 or 10% of South Africa’s exclusive economic zone.”

Something happening

One of CER’s objectives, Roux says, is to have in place a moratorium on bulk marine sediment mining in South Africa.   He complains that despite the three mining rights having been gazetted, he cannot get any response from Minister of Mineral Resources, Mosebenzi Zwane, or any access to any documents on the subject.

He stated there were two South African companies involved in mining sea phosphates and one international group, these being Green Flash Trading 251, Green Flash Trading 257 and Diamond Fields International, a Canadian mining company. All appeared to be interested in seabed exploration for phosphates although not necessarily mining itself.

Roux called for the implementation of an MSP Bill which specifically disallowed this activity as is the case in New Zealand, he said.

Coming your way

The MSP Bill was tabled in April 2017 and once provincial hearings are complete it will come to Parliament. The results of these hearings will be debated and briefings commenced when announced shortly.

Previous articles on category subject

Operation Phakisa to develop merchant shipping – ParlyReportSA

Hide and seek over R14.5bn Ikhwezi loss – ParlyReportSA

Green Paper on nautical limits to make SA oceanic nation – ParlyReportSA

Gas undoubtedly on energy back burner – 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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Fuel price controlled by seasonal US supply

US refinery shut downs affect fuel price…..

US refineryThe current spike in the price of petrol is due of a number of international issues  compounding together but the primary cause is that at this time of year in the United States, a number of major US refineries close down for maintenance in order to prepare for the US summer surge in fuel sales.

This was said by Dr Wolsey Barnard, acting DG of the department of energy (DoE), when he introduced a briefing to the portfolio committee on energy on its strategy for the coming year.

In actual fact, the meeting had been called to debate the promised “5-point energy plan” from the cabinet’s “war room” which did not eventualise, the minister of energy also being absent for the presentation as scheduled. It appeared that the DoE presentation had been hastily put together.

“Price swingers” make perfect storm

Dr Wolsey BarnardDr Barnard said that it could be expected that the price of fuel would be extremely volatile in the coming months due in main “geo-political events” affecting the price of oil, local pricing issues of fuel products and possibly even sea lane interruptions. Price would always be based on import parity and current events in Mexico, Venezuela and the Middle East would always be “price swingers”, he said.

On electricity matters, his speciality, he avoided any reference to past lack of investment in infrastructure, but said that he called for caution in the media, by government officials and the committee on the use of the two expressions “blackouts” and “load shedding”.

Same old story

“Over the next two years”, he said, “until sufficient infrastructure was in place, there would have to be planned maintenance in South Africa” and referred to the situation in the US as far as maintenance of refinery plant was concerned. He said that also “unexpected isolated problems” could also arise with ageing generation installations, during which planned “load shedding” would have to take place.

He said he could not imagine there being a “blackout”.

Opposition members complained that the whole electricity crisis could be solved if some companies would cease importing raw minerals, using South African electricity at discounted prices well below the general consuming manufacturing industry paid, and re-exporting smelted aluminium back to the same customer. They accused DoE of trying to “normalise what was a totally abnormal position for a country to be in.”

Billiton back in contention

One MP said, “Industry was in some cases just using cheap South African electricity to make a profit”. Suchaluminium smelter practices went against South Africa’s own beneficiation programme, he said, in the light of the raw material being imported and the finished product re-exported. “It would be cheaper to shut down company and pay the fines”, the DA opposition member added, naming BH Billiton as the offender in his view.

Dr Barnard said DoE could not discuss Eskom’s special pricing agreements which were outside DoE’s control  and “which were a thing of the past and a matter which we seem to be stuck with for the moment.”

High solar installation costs

Dr Barnard also said that DoE had established that the department had to be “cautious on the implementation of solar energy plan” as a substitute energy resource in poorer, rural areas and even some of the lower income municipal areas.  DoE, he said, “had to find a different funding model”, since the cost of installation and maintenance were beyond the purse of most low income groups.

In general, he promised more financial oversight on DoE state owned enterprises and better communications.   There were plenty of good news stories, he said, but South Africa was hypnotising itself into a position of “bad news” on so many issues, including energy matters. He refused to discuss any matters regarding PetroSA, saying this was not the correct forum nor was it on the agenda.

Still out there checking

On petroleum and products regulation, the DG of that department, Tseliso Maquebela, said that non-compliance in the sale of products still remained a major issue. “We have detected a few cases of fraudulent fuel mixes”, he said, “but we plan to double up on inspectors in the coming months, especially in the rural areas, putting pressure on those who exploit the consumer.” The objective, he said was reach a target of a 90% crackdown on such cases with enforcement notices.

Maquebela added that on BEE factors, 40% of licence applications with that had 50% BEE compliance was now the target.

Competition would be good

On local fuel pricing regulations, Maquebela said “he would dearly like to move towards a more open and competitive pricing policy introducing more competition and less regulations.”

fuel tanker engenOn complaints that the new fuel pipeline between Gauteng and Durban was still not in full production after much waiting, Maquebela said the pipeline was operating well but it was taking longer than expected to bring about the complicated issue of pumping through so many different types of fuel down through the same pipeline. “But we are experts at it and it will happen”, he said.

Fracking hits the paper work

On gas, particularly fracking, DoE said that the regulations “were going to take some time in view of all the stakeholder issues”.

On clean energy and “renewables” from IPP sources, DoE stated that the “REIPP” was still “on track” but an announcement was awaited from the minister who presumably was consulting with other cabinet portfolios regarding implementation of the fourth round of applications from independent producers.

Opposition totally unimpressed

In conclusion, DA member and shadow minister of energy, Gordon McKay, said that the DoEgordon mackay DA presentation was the most “underwhelming” he had ever listened to on energy.   Even the ANC chair, Fikile Majola, sided with the opposition and said that DoE  “can do better than this.”

He asked how Parliament could possibly exercise oversight with this paucity of information.   DoE representatives looked uncomfortable during most of the presentations and under questioning it was quite clear that communications between cabinet and the DoE were poor.

When asked by members who the new director general of the department of energy would be and why was the minister taking so long to make any announcement on this, Dr Wolsey Barnard, as acting DG, evaded the question by answering that “all would be answered in good time”.

Other articles in this category or as background
Energy gets war room status – ParlyReportSA
Medupi is key to short term energy crisis – ParlyReportSA
Integrated energy plan (IEP) around the corner – ParlyReportSAenergy legislation is lined up for two years – ParlyReportSA

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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

Liquid fuels industry short on BEE charter

Fuel industry attacked on BEE …

On the subject of black economic empowerment  (BEE), acting director of the department of energy (DoE), Tseliso Maqubela, told Parliament, before it went into short recess, that the major target for his department was to ensure a more immediate transformation of the liquid fuels industry.   Economic transformation in the energy sector was a top priority, he said, and he told the portfolio committee on energy that much more was needed to be done by this sector to improve the situation.

This was reminiscent of similar complaints made of the mining industry under the same BEE charter by the director general of the department of mineral resources.

Victor Sibiya said, as DoE’s  deputy director of petroleum products, also acting, that one of the three pillars of his department’s programme was compliance, monitoring and enforcement and whilst 30% of petroleum licensing permits showed around a 50% compliance factor this was not enough and new legislation was on its way to “toughen up” on B-BBEE regulations.

New code called for

The challenge at present, he said, was that the process of penalisation was far too cumbersome and did not deal sufficiently with repeated offenders.   A revised code was urgently required, he added.

On a separate subject, Sibaya said that as far as the basic fuel price (BFP) was concerned all calculations were based as if the final product had been produced in South Africa.  DoE was at work, he said, on a paper studying the various elements that contributed to the BFP, particularly with regard to smoothing out fluctuations to the consumer and attempting to align municipalities to the magisterial zones which governed the distribution.

Retail margins were also being studied in a second round of estimations working with operations carried out by what was referred to as the “DoE model service station”. Other factors included the shortly to be published biofuels price schedule which would govern the mix with petroleum products.

Reaching out

Further to economic transformation programmes, Sibaya spoke of a programme to establish fuel stations in deeper rural areas supplying other forms of energy needed by households such as LPG and extending services to include food, household retail goods and community services to improve quality of household life amongst the poor, another NDP priority.

In broad terms the acceleration of LPG supplies to rural areas, in fact to all areas in general, would contribute greatly, he said, to this objective.

Acting DG Tseliso Maqubela said he would respond to the parliamentary enquiry on the volatility of fuel prices in a prepared paper shortly, as this issue was also in the process of being studied at present. When asked about the levy on purchase of vehicles and where the funds went, Maqubela said this was in national treasury’s domain and was “probably an attempt by treasury officials to mitigate on carbon emissions”.

Refinery decisions

Touching on petroleum issues, DG of energy policy, planning and clean energy, Ompi Aphane, told the committee that a decision would be taken during 2016 on expanding oil refining capacity in South Africa based on the conclusions of the liquid fuels infrastructure plan.

Contributing to the basic costs of energy at the moment in South Africa, he said, were current world tensions particularly in the Middle East.   Self-dependency, however, was unfortunately only a long-term goal, he said.

A similar plan to increase refining was an increase in gas supplies based on the current gas usage master plan that had been started and this programme would be concurrent with an urgent expansion of gas storage facilities in the country.

Minister weighs in

Most of parliamentary question time was occupied by the new minister of energy, Tina Joemat-Pettersson, who spoke broadly on energy issues; the fact that she recognised the need for urgent decisions by her ministry; and the necessity for her recently launched ministerial advisory committee on energy to receive input “in order that the opinions of all stakeholders can be considered.”

Such a ‘brains trust’, she said, should also include representation from the portfolio committee on energy itself.

Other articles in this category or as background

http://parlyreportsa.co.za//?s=bee+liquid+fuels

http://parlyreportsa.co.za//bee/eskom-black-owned-coal-mining/

 

 

Posted in BEE, Energy, Facebook and Twitter, Finance, economic, Fuel,oil,renewables, LinkedIn, Mining, beneficiation, Special Recent Posts, Trade & Industry, Transport0 Comments

Oil/sea gas debate re-started by Parliament

Parliament calls for public input on gas debate….

Roughnecks wrestle pipe on a True Company oil drilling rig outside WatfordOn the prospects of transforming the gas industry through partnerships, the parliamentary portfolio committee on energy has invited comments.  Recent presentations to the portfolio committee have led to a renewed belief that gas, whether found and transformed, offshore or onshore, needs more focus.

The background to the invitation for comment, which will have no doubt come from chair Sisi Njikelana, says, “Current development of regional gas-fields will lead to natural gas becoming a more important fuel source in South Africa. With the availability of natural gas in neighbouring countries, such as Mozambique, Namibia and Tanzania, and the additional discovery of offshore gas reserves in South Africa, the gas industry in South Africa is poised to undergo expansion.”

The notice continues, “ Natural and coal gas play separate roles in the energy system, with natural gas being used solely as a feedstock for the production of synthetic fuels, and coal gas as an industrial and domestic fuel.”

“The gas industry in South Africa is regulated by the Gas Act 48 of 2001, which is currently being revised. As part of the build up to discussing amendments to this Act, Parliament wishes to engage the public on the topic of “Prospects of transforming the gas industry through partnerships”.

“Sub topics (as part of the main theme) can include (but not limited to) finance, pricing, infrastructure development, procurement, technology research and development, key success factors, skills development and transfer, community involvement and expansion of the gas industry in South Africa.”

Public hearings are scheduled for 30 January 2014. Interested individuals, organisations and institutions wishing to comment were requested in the notice to forward written submissions to the Portfolio Committee have been asked to declare an interest in making an oral presentation to the portfolio committee itself if they so wish.

Posted in Energy, Enviro,Water, Facebook and Twitter, Finance, economic, Fuel,oil,renewables, LinkedIn, Mining, beneficiation0 Comments

Nuclear and gas workshop meeting

Gas emerges as winner……

nuclear logoIn what appeared to be a listening platform for anti-nuclear lobbyists, an energy stakeholders meeting, organised by the portfolio committee on energy on nuclear energy with the subject of nuclear energy as a component of South Africa’s future energy mix, was billed as a debate as such.  However it turned out to be a platform for speakers and not a debate at all.

This was primarily because there were so many submissions and questions had to be cut down to one minute, most of the earlier time having been taken by the department of energy, NECSA and proponents of the nuclear build programme using the day for presentations, already seen in Parliament and by parliamentarians.

Nuclear platform not provided

Opposition members expressed their anger at their inability to listen to any serious opposition to the use or deployment of nuclear facilities but a number of interesting points did emerge that may give value to whether or not it was worth having had a meeting at all.

Much of what emerged was the seriousness of the costs of any nuclear programme; safety matters and job creation ability, particularly in the relationship between nuclear versus solar and wind and other clean energy projects.

Govt. seems fixed on nuclear

Whilst the chair, Sisa Njikelana, said the meeting was not about trying to change government plans on its nuclear ambitions which clearly included nuclear energy in its planning, or debate the extent to which whether or not nuclear will or will not be part of the energy mix, he nullified arguments put forward by stating that a revised integrated resources plan was to be available in the coming weeks.

Most presenters expressed surprise that government policy was so fixed on the matter.

What did emerge that detractors were quoting the high costs of Finnish nuclear re-actors but the subject of low-cost Chinese or Korean re-actors did not emerge, as stated by one commentator.

Plans for waste in hand

Furthermore, DEO negated all complainants on the issue of nuclear waste by saying that plans were in process to handle long term nuclear waste with a scientific solution by government and the main problem was a misinformed public at this stage.

DEO also responded that hydro power could be a lot more dangerous and threatening to a massive number of communities downstream than any nuclear re-actor and that nobody had died in the Fukushima accident, which was the result of an earthquake not nuclear mishandling.

From results tabled it appeared that wind power was more expensive on a consumer cost basis.

Shell says gas cost effective

A major input came from Shell SA who pointed out that whilst they were not against building nuclear plants but for cost of building one nuclear plant, three national gas pipelines could be built, enough to handle all South Africa’s gas field requirements and include also the cost of gas to fuel technology.

The result of the stakeholders meeting in fact resulted in a determination of parliamentarians to insist upon DEO that gas should be focussed upon to a far greater extent when determining South Africa’s future energy mix and needs.

Refer to articles in this category

http://parlyreportsa.co.za//energy/integrated-energy-plan-iep-around-corner/ http://parlyreportsa.co.za//cabinetpresidential/nuclear-goes-ahead-maybe-strategic-partner/ http://parlyreportsa.co.za//energy/national-nuclear-control-centre-now-in-place/

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

Fracking moves in November, says Minister Davies

Fracking equals jobs…….

frackingFracking for shale gas is under serious consideration by the minister involved and the department of energy, Deputy President Kgalema Motlanthe told Parliament recently, giving his reasons to parliamentarians for this statement as resulting from a cabinet discussion on economic imperatives, the need to create jobs and advance growth.

Minister of trade and industry, Rob Davies, also weighed in on the subject with a comment a few days later.  He also said that the cabinet had discussed the issue recently and they had concluded that the country could not rely just on a tentative upturn in the United States and Europe to help local growth and job creation but must commence its own initiatives.

Lobby for and against

Minister Davies acknowledged that there was indeed a strong environmental lobby against hydraulic fracturing but said government now needed to consider proposals for and against starting exploration in the light of the “cabinet lekgotla that had discussed global economic developments and which had decided to advance the work on taking a decision on the matter.”

Davies said Cabinet believed shale gas could be a vital component in South Africa’s quest for energy security, but at this stage the potential extent of local reserves remained unknown. “It is our intention to move before the end of this administration”, meaning before mid-November when Parliament closes.

Gas nearby

He said that also Mossgas has a resource of about one trillion cubic metres of gas, Mozambique having about an estimated hundred trillion cubic metres with some estimates that the shale gas deposits in South Africa are far bigger.

“If this was the case, this whole question could be a very, very significant game changer in terms of the energy situation in South Africa”, he said.

Handle with care

On the subject of opposition from the Karoo anti-fracking lobbies, he said that government would not proceed in an irresponsible way.  “We obviously have to bear in mind all the environmental implications including, of course, the nature of the relationships with any company that gets any kind of permit – what is going to be the delivery in terms of a positive impact on the economy.”

He mentioned that in an overall picture, the main constraint to growth that requires immediate attention was the energy situation. He said that discussions now were at senior government level.

previous articles on this subject
http://parlyreportsa.co.za//energy/chemical-industries-plan-for-training-skills-in-fracking/
http://parlyreportsa.co.za//cabinetpresidential/to-ignore-fracking-would-be-an-opportunity-lost/
http://parlyreportsa.co.za//energy/move-by-minister-to-qualify-shale-gas-exploration/
http://parlyreportsa.co.za//cabinetpresidential/water-affairs-looking-at-nine-months-to-answer-on-fracking/

Posted in Enviro,Water, Facebook and Twitter, Fuel,oil,renewables, Labour, LinkedIn0 Comments

Uncertainty in oil and gas exploration industry

Oil and gas industry criticizes MPRDA Bill…

Government’s definition of what an  oil and gas industry stakeholder is and the continuous use of that mysterious word “player” have both come in for some serious investigation after the recent hearings into the Minerals and Petroleum Resources Development Amendment Bill, which aims to grab a stake in oil and gas exploration industry and combine the BEE charters of both the mining and liquid fuels industry with regard to employment and beneficiation.

The minister now announced that the state will be able, it will be pr0posed, to acquire at first 20% in successful gas exploration ventures  without capital outlay (called “free carry”) and subsequently 50%.

In the case of this Bill tabled in Parliament, after public comment, participation with industry stakeholders, such consultation with stakeholders has been claimed by the minister involved both in print in the written background to the Bill as part of the tabled document and by the departmental of mineral resources in  briefings to the portfolio committee concerned.

Generally, liquid fuels companies are concerned at the suggestion that if both BEE charters are combined it is like “combining water and oil”, to quote one member, since the mining industry is more labour intensive with massive capital outlay and the liquid fuels industry is twice as capital intensive but with less manual labour involved but greatly higher risk issues in capital outlay.

According to a number of oil and gas industry exploration companies vitally affected by the proposals contained in the Bill, any discussions with the gas exploration industry  has neither happened nor were they even notified.

State participation

Considering the fact that the Bill proposes acquisition by legislation of shareholding in those companies and regulations, as yet unpublished, will vitally affect not only their balance sheet but whether they enter into ventures in the first place, makes this is extraordinary.

One imagines that not only are eyebrows raised in the international world of trading and investment but some unfortunate comparisons made to other failed states in Africa.

Certainly there is a fear of exploitation in Africa and not without undue reason. Also it was hoped that one set of reasonable rules, known well ahead, would bring the kind of certainty that was needed to key worldwide industries and this would bring in turn South Africa to the top of list in investment destinations in an otherwise very unstable and avaricious stable of governments to our North.

Lack of certainty

From what has been said during the hearings on the Minerals and Petroleum Resources Development Amendment Bill, the minister would seem to be way off mark with this new Bill, some of those making submissions saying it was the first time they got their voices heard and others stating that some of the conditions are outrageous.

Whilst the terminology “hearings” is used for such sessions after a Bill is tabled, we just hope that the minister is listening.

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

President Obama and Power Africa

Power Africa and a $7bn involvement

In an excellent speech to a young audience at the University of Cape Town but seen the world around, the words “Power Africa” were heard by many for the first time from none other than the President of the US and although by no means did the financial implications have any comparison to the US Marshall Aid plan to Europe in 1945, this is without doubt a much played down mini-version in energy terms.

It comes with an initiative already started; US business plans in energy to Africa already in motion to an estimated tune of $9bn….. and thats just a start, said President Obama.    Energy, he said, is the key to Africa and electricity to all homes is the hope for all Africans. Without electricity there is no possibility that education can take root and therefore no way out of the poverty cycle, he said.

Electricity for all

If anything of value therefore from a business viewpoint came out President Obama’s trip other than some very warm-hearted gestures of friendship, it was certainly the extraordinary news that he personally, and that presumably means in fact the US Administration, has plans for a state $7bn initiative to enhance access to every household with electricity across Africa by tapping the continent’s vast energy resources and plenty of money by attracting international US investment.

By reading up on Forbes Magazine, which presumably has one of the best lines on what the US Administration is up to financially, their story on Power Africa appears to be already a well established initiative in the US.    For the most part, it is most detailed.   The story ends, however where perhaps it should have started.

In the last paragraph, after a giving a picture of the structure of the Power Africa programme and the names of the many partners US partners contributing to the initiative with finance and skills, the Forbes article ends with the observation……

“The recent discoveries of oil and gas in sub-Saharan Africa will play a critical role in defining the region’s prospects for economic growth and stability, as well as contributing to broader near-term global energy security.  Yet existing infrastructure in the region is inadequate to ensure that both on- and off-shore resources provide on-shore benefits and can be accessed to meet the region’s electricity generation needs.”

And there, possibly, we have it.   A sort of Mozambique Channel gold rush.   Yet we are assured by no less than President Obama himself that the USA has enough shale gas not to be importers but shortly exporters.

The Chinese robotic approach

However, to assume the US is looking for new oil fields for its own use or not would be to miss the point.   Trading in Africa with Africans was the point in Obama’s speech and hopefully, as the US President says, the USA can add value to what is made in South Africa before it is exported and not just exploit the resources in Africa, as does he says China and others of their ilk. The general feeling remains that China will put in power plants just to get out the resources. Either way, we get power – but the US way seems more sustainable and of use to economic and social needs of Africa in the long run.

Power Africa, Obama says, will, in, addition also “leverage private sector investments” beginning with an additional $9 billion in initial commitments from private sector partners in sub-Saharan Africa.   Most of the talk is about land-based electricity grid support, off grid projects, renewable energy projects and supplies to marginalised communities and there was a clear inference in the article that nobody in the US was going out of their way to invest in more coal mines.

The article says most importantly, “Although many countries have legal and regulatory structures in place governing the use of natural resources, these are often inadequate.  They fail to comply with international standards of good governance, or do not provide for the transparent and responsible financial management of these resources.”

“Power Africa”, Forbes continues, “will work in collaboration with partner countries to ensure the path forward on oil and gas development maximizes the benefits to the people of Africa, while also ensuring that development proceeds in a timely, financially sound, inclusive, transparent and environmentally sustainable manner”

In other words there has to be certainty.

ParlyReport this week focuses on the introduction to the South African  public of the Mineral and Petroleum Resources Development Amendment Bill on that very subject. One would hope that the intentions of government to have a stake in oil and gas exploration success stories do not frighten investors off and that the amendments to the Act stay fixed when agreed, give certainty and are properly regulated and the MPRDA changes are not the precursors of the mess that such regulations are to our North.

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

Future clearer as Gas Amendment Bill comes forward

Nersa will organise licensing…..

The Gas Amendment Bill was about to be tabled in Parliament as part of the overhaul of the Gas Act, energy minister, Dipuo Peters, confirmed  in her budget vote speech, the draft of the Bill having been approved by cabinet in April of this year and published for comment in June. According to a media statement by department of energy (DoE) on the draft Bill, certain omissions in the Gas Act of 2001 are addressed such as inadequate powers conferred on NERSA, the need for speedier licensing and clarity on pricing and tariffs. Stakeholders from industry have been involved.

Much of the new Bill according to DoE in the energy presentations to Parliament  will reduce the risk of South Africa having an “underdeveloped natural gas sector” with consequent implications to the security of energy supply.

Transportation addressed

gastruckAttention in the draft Bill is paid to unconventional gases not included in the original Act, along with technologies for transporting natural gas in liquid and compressed form. The new draft Bill also clarifies NERSA’s functions in the many processes and stages that involve gas between exploration to sale in containers, including storage.

During the ministers recent briefing, the attention of the media for assistance in promoting LP gas as a safe alternative to electricity.

The many re-definitions included in the draft reflect the changing nature of gas exploration in South African waters; the possibility of gas reticulation; the changing nature of gas storage and complexities of LP gas consumer issues.

Sasol big player

In piped gas, Phindile Nzimande, CEO of NERSA recently told parliamentarians that the maximum prices for such were dealt with in regard to Sasol, this being the last year of the “maximum price” arrangement. In petroleum pipelines, the Transnet annual increase was set at 8.53%, again with much controversy, and decisions were made on 60 storage and loading facilities.

There was still a major lack of credible gas anchor clients in piped gas, Nzimande said, nor was there an established and regular supply chain and serious competition, resulting in high prices for the poor. NERSA had much work to do in this area, she said, as far as compliance monitoring and enforcement was concerned.

 

The following articles are archived on this subject:
http://parlyreportsa.co.za//uncategorized/more-hints-that-gas-act-amendments-on-the-way/
http://parlyreportsa.co.za//energy/south-africa-at-energy-crossroadsdoe-speaks-out/

Posted in Energy, Enviro,Water, Fuel,oil,renewables, Land,Agriculture, Trade & Industry0 Comments

NERSA reports on an anxious year in energy

Unlicensed pipeline operations a problem….

Phindile NzimandeCommenting that the petroleum and gas industry did not seem to take licensing particularly seriously but the electricity industry did, Phindile Nzimande, CEO of the National Energy Regulator (NERSA), gave a characteristically outspoken report to the parliamentary committee on energy on NERSA’s strategic and plan until 2016.

She noted that  NERSA had investigated sixty seven suspected unlicensed activities in petroleum pipeline activity, only four of which were found to not require a licence. Thirteen petroleum storage licences were revoked.

NERSA not changing plans

Nzimande said that NERSA found no reason to alter their five-year plan as originally submitted in 2012 and NERSA would continue with its mandate of transparency, neutrality, predictability and independence. It has been a busy year, she said, not the least of which was the extraordinary amount of work generated by Eskom tariff application, the national hearings process and the time involved in decision making.

In the area of electricity generally, 183 municipal and private distributor tariffs were given approval and 47 energy generation licences granted. 9 distribution licences for connection facilities between Eskom and an independent power producer (IPP) were also granted.

Sasol back to listed tariff next year

In piped gas, Nzimande told parliamentarians that the maximum prices for such were dealt with in regard to Sasol, this being the last year of the “maximum price” arrangement. In petroleum pipelines, the Transnet annual increase was set at 8.53%, again with much controversy, and decisions were made on 60 storage and loading facilities.

There was still a major lack of credible gas anchor clients in piped gas, Nzimande said, nor was there an established and regular supply chain and serious competition, resulting in high prices for the poor. NERSA had much work to do in this area, she said, as far as compliance monitoring and enforcement was concerned.

Costly multi-product line

In the area of petroleum pipelines, Nzimande said the “prudency” investigation into the cost of the multi product Durban/Gauteng pipeline was a major undertaking and NERSA was also involved with Transnet on the issue of high port charges which had become a national issue.
The security of supply of petroleum to inland areas was also a matter of deep concern, Nzimande said, and NERSA was “working with stakeholders”. When asked how NERSA was monitoring this she said the matter was very much up to the investors concerned but she was aware that department of energy “was grappling with the issue” and NERSA was closely following the matter which had to be taken in to consideration on pricing matters.

Local government problems

On tariffs generally, Nzimande said a major issue facing NERSA was the legal issue of regulatory relationships with municipalities and their powers in respect of enforcing licensing and pricing structures. This was to be resolved shortly.

When asked if Eskom would be allowed to re-visit the issue of their tariff structure finally allowed and appeal, Nzimande said that she eskom logocould not say that that such a move could be excluded as a legal part of the multi-year price determination process. The chair excused her for answering questions on the Alstrom and Hitachi legal wrangle on the Medupi power plant currently under construction by Eskom but she acknowledged that NERSA was aware of Eskom’s problems and financing issues.

NERSA and NNER?

When asked why NERSA and the structures of nuclear regulatory matters were not combined into one regulatory body, Nzimande replied that international agreements and the structure of the nuclear global industry was specific on this issue and required specific nuclear regulators with specific mandates for their own countries to be established. The work and relationships of a nuclear regulatory authority were very different, she said.

She agreed with complaints regarding difficulties in the petroleum storage area and confirmed that the regulations may have to be re-written in this regard. She was specific that NERSA would look into the issue of tariffs for storage, since one member complained that the current high cost structures could well be acting as a disincentive to investment.

Associated articles archived
http://parlyreportsa.co.za//energy/durbangauteng-pipeline-still-three-years-behind/
http://parlyreportsa.co.za//energy/nersa-gets-countrywide-thumbs-down-to-eskom-increases/

Posted in Electricity, Energy, Enviro,Water, Fuel,oil,renewables, Mining, beneficiation, Public utilities, Trade & Industry0 Comments


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