Tag Archive | oil pipeline

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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NERSA worries on limited oversight on new oil pipeline

In a presentation before the select committee on economic affairs, the national electricity regulator (NERSA) presented an overall view of its performance for the last year, stating one of its biggest challenges lay in the petroleum pipelines area because of different authority in various aspects of the supply chain which compromised regulatory oversight. The cost of the pipeline was most recently estimated at R23.4bn.

Ms Esther Viljoen of the strategic planning and monitoring division, NERSA, said the security of supply of petroleum to the inland areas was difficult at times as a result of too many non-state players in the structure.    Another problem, she said, was that some of the revenue from tariffs was being deployed in some state-owned entities for capital expansion.

In the electricity regulatory area, Viljoen said 177 municipal tariffs were approved and, as all knew, a revised tariff increase for Eskom of 16% instead of the originally approved tariff of 25.9% was approved for 2012/13.   A determination was also made on the procurement renewable energy.

NERSA also granted five electricity generation licences, granting one distribution licence and revoking another.

In piped-gas industry regulation, Viljoen said a methodology had been set up for maximum prices for piped gas and stakeholder workshops held to explain the new calculations.    Five licences for the construction of gas transmission facilities; two licences for the construction of gas distribution facilities; two operation licences; and one trading licence were granted.

In the petroleum pipelines industry regulation, NERSA approved, she said, an increase of 31.58% in allowable revenue for Transnet for 2012/13 and approved storage facility tariffs for nine licensees.     It further approved three construction licences and one operational licence, while revoking eight licences from Chevron.

Viljoen said NERSA still faced difficulties promoting access to petroleum storage facilities for BEE designated South African wholesalers.

Challenges in the piped-gas industry regulation were certain piped-gas activities not in the Gas Act; Sasol’s non-compliance in certain areas of supply and, thirdly, off-take agreements in the private sector had been a problem.  Viljoen also mentioned the failure to act decisively over fracking in the Karoo, with cabinet deciding to suspend exploration resulting in Sasol going overseas to Canada and Shell still awaiting results on its prospecting ability.

NERSA said it was aware of the escalations in costs and the delays in the construction of the new pipeline  infrastructure and would monitor this and facilitate the entry of BEE entrepreneurs into the exercise

In response to a question from chairperson Freddie Adams who said that he understood that foreign refineries were superior to South African refineries and that pricing was putting South African refineries outside of the market, Thembani Bukula of NERSA replied that NERSA did not regulate the pricing or the refineries in that it only regulated the pipeline that moved petroleum from the coast inland and to the storage facilities.  To improve regulation of the petroleum industry, Bukula said the state would have to provide NERSA with full regulatory powers on the entire value chain.

In response to the questions regarding the industry’s monopolistic environment, Mbulelo Ncetezo, NERSA’s electricity regulation manager, said that Eskom’s current monopoly arose from the market structure that the government policy had set up.  As such, this issue must be decided by the government, and was nothing NERSA could do to address the core issue of the market structure.

Thabo Ramanamane, NERSA head of petroleum licensing, said on petroleum products the problem was one of dominance by the major petroleum companies in a situation where South Africa imported around 40-50% of its petroleum and the new pipeline was connected to a storage owned by the private sector.

Whilst therefore the pipeline was a common carrier, which accommodated everybody’s needs with access proportionate amounts, storage facilities on availability under the control of others, presented a challenge for regulatory purposes.

At this point an argument developed with MPs on the future of supplies from shale gas changing the entire picture but Ramanamane said NERSA had not pronounced itself for or against Shell gas exploration in the Karoo, Viljoen adding that the consequences that flowed from the associated regulatory uncertainty had produced strategic planning difficulties.

Mr Ramanamane said the new infrastructure plan in hand would benefit the petroleum side by decreasing transportation by road and switching to pipeline or rail transportation from road.

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