Tag Archive | parliamentary committee on energy

Durban/Gauteng pipeline still three years behind

NERSA to review Transnet’s progress…

engineering news

engineering news

In commenting on NERSA’s decision not to allow Transnet’s application for a 22.6% increase but instead hold this back to 8.5%, Dr Rob Crompton as pipeline regulator was starting a “prudency” review of the Durban/Gauteng fuel pipeline project in view of the fact that it was three years behind.

It was unlikely to catch up and costs had escalated from an original R9.5bn in 2005 (at the last count in 2010) to R23.4bn.  The the overrun was now into unknown realms, he said.

Whilst Transnet has a network of 32 pipelines over 3,800km, the current new multi-product pipeline, or NMPP, has been giving headaches for some considerable time mainly due to its multifaceted product pumping nature.    NERSA said that they were using the word “prudent” because they did not wish to jump to conclusions or make any assessments themselves until the project was complete. The minister of public enterprises has called for an investigation into the escalating costs, meanwhile.

Pipeline volumes declining

It was notable NERSA,  as a whole, has to bear in mind that in the case of the Transnet application for a tariff increase the application was for one year only not multi-year. The worrying factor to NERSA, Rob Crompton said, was that volumes carried on the pipeline were declining – a lot of which was due to the fact that whilst some six grades of petrol, two diesel and also biofuels were carried, there also came a major complication with high and low sulphur content diesel where special tanks and road haulage had to be used.

As an outsider, Dr Crompton said that NERSA could see that Transnet had been asked to quadruple its assets but there had been no injection of capital with the result that Transnet seemed to be building on a “pay as you go “ principle, raising capital where necessary. This was far from satisfactory, he said.

Dr Crompton noted that no further help had been mentioned in the 2013 Budget speech

Fuel price structure complicated

NERSA said that of the nearly thirty items that went to make up the petrol price structure in South Africa, from road accident funding to wholesale margins, only about 16% of the price came in “administered prices” and NERSA, in establishing their views, had only studied one element of this.

He said that in studying Transnet’s application and finally setting a much lower figure, a balance had to be found between the principle adopted of “user pays”, in other words the motorist, and Transnet being able to “claw back” unspent sums or altering over-charged budgets.

Storage nearly finished

nmpp tanksIt was noted, however, that Transnet forecast a 4.6% increase in volumes in 2013/14 and that the tank storage projects at either end of the line should be finished shortly.

NERSA said it was trying to work with the department of energy to get consistent regulations on the whole, or at least a lot more parts, of the entire cost structure but it was unlikely as things stood whether pipeline tariffs would become “multi-year” to assist in longer term planning from what could be seen.

Parliamentarians were complimentary to the NERSA staff on their diligence and producing a result which had helped the consumer in difficult times.

Associated articles archived

Posted in Energy, Finance, economic, Fuel,oil,renewables, Labour, Public utilities, Trade & Industry0 Comments

Central Energy Fund slowly gets its house in order

Central Energy Fund reported to the portfolio committee on energy that for 2011/2 it had importantly re-structured some of its investments and had now reached the halfway stage of what it felt essentially that an energy development company should look like.

Chris Cooper, Corporate Planner, CEF, told parliamentarians that the somewhat torrid times of the part were now behind them, have divested themselves of SANEIRI, the research body which had now become SANEDI, and they seemed to be withstanding the venture losses by PetroSA.

CEO Busi Mabuza had been advised medically not to travel and was not present. Parliamentarians asked directly if the lack of a fully substantiated and active CEO and leadership in other areas was affecting CEF operations and CEF directors replied that with team effort matters were improving, as reports showed.

Cooper said that in the CEF stable was now a stable SFF, which was dealing well with the handling strategic fuel stocks despite a downturn in storage rentals. There was Africa Exploration Mining and Finance, which was exploring for new finds of fuel feedstock and which would shortly leave CEF, going to the department of mineral resources. Also PASA, or the Petroleum Agency of SA, handling data, licences and monitoring as a petroleum agency was successfully selling its exploration data.

I-Gas which had a major interest in the ROMPCO gas pipeline from the Mozambique gas fields to Mossel Bay and SASDA which was as a developmental supplier of goods to the whole group, supplied separate reports but in an overall sense, Cooper added, and whilst small players at this stage, both companies had made important contributions.

MPs continually emphasized the need for developmental evaluations on gas off the Mozambique coast and Cooper replied that in terms of financial restraints as much was being done as possible, particularly with regard to the Ikhwezi project handled by PetroSA.    He said a pipeline was already being laid from a platform to onshore at Mossel Bay.

Cooper said that by next year, CEF would see its final shape whereby the group would existing on two legs only, splitting its interests between hydrocarbons and renewable energy development. `

He noted with some cynicism that when CEF had started, it had been almost “fashionable” in the energy environment to look at and investigate the many sources of renewable energy and much time had been expended, even wasted, but CEF had done its job by sorting out, with experimentation, research and piloting and limited capital projects using what funds were allocated, what was practical and right for South Africa.

The picture, he said, was becoming clearer, particularly if shale gas was added to the possible inputs to the final formula. The Petroleum Agency of SA (PASA), a subsidiary of CEF, was involved in the investigations into hydraulic fracturing.

Quite clearly, he said, forms of solar engineering had to be undertaken in the battle to supply electricity to the poor; the need for further feedstock in crude was an ongoing issue in a country where South Africa were takers not makers; and the potential of gas supplies for energy generation, and even vehicle production, had to be followed up on.

Cooper referred to a number of undertakings in the carbon capture area and said that working was continuing mainly based on grants from overseas and which technology was being conducted onshore to save on costs and retain better control on drilling. The future potential was to undertake carbon capture in a practical senses at sea for obvious reasons.

Revenue increased 35% to R15m (2010 : R11m 2011) mainly due to higher crude oil prices and an increase in crude and finished products. Operating expenses were down 10% while profit after tax increased 39% to R1, 85m (2011: R 1,3m) largely due to cost containment measures as well as the deferral of certain projects which required more feasibility studies.

The group maintained its strong net cash position at R19m (2011: R17, 5m).  The group’s financial position remains solid it was reported, with total assets amounting to R35, 3m.

Technical write-offs, in the area of PetroSA, which would be separately reported on, parliamentarians were told. The issue of reduced tank storage rentals at SFF was also a problem.

The group had received an unqualified opinion on its financial statements for 2011/2012 but DPME had reported separately and internally on the poor human resource programme which was acknowledged and being rectified; some irregular expenditure where the proper PMFA procedures had not been followed and faulty environmental procedures occurring during PetroSA operations, which had been corrected.

New board member, Rizia Jowoodeen, clarified MPs questioning on grades of crude that CEF was dealing with at one given time, particularly with regard to Venezuelan, Egyptian, Equatorial African and other adventures and said that this was a transparent issue and all worked through SAPIA to establish the correct levels of octane based on existing refinery capabilities but that South Africa had to look around and thinking had to engage alternatives to light crudes.

On strategic crude stock retention, Jowoodeen said that department of energy controlled this but there seemed a move coming to increase such figures. He said the difficulty experienced by CEF that there was no wording in the Public Finance Management Act to cover the task of venture capital undertakings.

However, risk management was a very real issue at CEF, he said, but essentially they were a developmental body and the journey to a good energy mix and energy security in the long term for SA was never going to be an easy one financially.

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

First round of IPP producers named for grid supplies

In the first round of allocation of bidders in terms of the department of energy (DOE) renewable energy allocation procurement programme, 39% of the allocated 3625MW for independent power producers has been decided upon.

Parliamentarians were told that the number of “passing bids” was 66.5% of those submitted, resulting in a total capacity of 1415 MW of the 3725MW to be procured being taken up at this stage.

By far the greatest number of projects was solar energy projects, either solar voltaic or solar CSP, with slightly over 30% being wind projects. Twenty eight projects in all were found to be acceptable.

No biomass, biogas, landfill or small hydro projects were submitted in this round, or “window” as it is referred to by DOE.     All projects decided as acceptable were from Eastern, Western and Northern Cape. In all some 68 applications were received.

Ompi Aphane, acting deputy director, DOE, told the portfolio committee of energy that small 100MW projects would be handled separately, the original procurement documents for the bidders for larger scale projects having been released during August 2011 and the compulsory bidders conference held in September for these and for the second window now to be considered.

All documents have been treated as confidential by all parties and are still treated as such in view of the fact that the process is ongoing.

Evaluation of projects on the issue of land rights where, Aphane said, South African law “was antiquated and not clear”, have and might give difficulties. The same applied to municipal issues insofar as relationships and responsibility might be concerned, he said.

On the whole such issues would be the concern of the supplier to sort out but it had to be remembered, Aphane said, that at the same time all such problems were “everybody’s problems and it would serve South Africa best to sort them out at every level.”

On land matters as well, there might be problems in agricultural areas concerning projects that involved good arable farming land but very little in the way of problems were land was fallow had arisen so far or had been pointed out by the evaluators. Registration of leases or proof of land use application had to be shown in submissions.

Commercial legal issues, economic development priorities, financial oversight and technical issues had all been studied and a large evaluation team made up of international legal experts, well known local legal evaluation teams and technical consultants had been assembled. Financial evaluation had been undertaken by Ernst and Young and PricewaterhouseCoopers.

Under questioning by parliamentarians it became evident that all competitors had to be at least 40% South African owned. When asked if there were any landfill, biogas, and biomass projects that had become evident in early bidding under the second window period, Aphane said that such had not arisen at all, nor were they expected to be, mainly because they would be of a minor nature insofar as they would fall under projects providing 100MW or less.

Hydro projects had not arisen. He also commented that projects emanating from “fossilisation processes” were disallowed.

On whether the same extended and expensive evaluation process would be applied to the second and third round of bidding, Aphane said that “DOE had learnt much from the processes applied in the first round” and that the ground rules established by both experts, consultants and official bodies could be applied henceforth.

Questions on final pricing per unit of electricity arose and deputy director general Aphane said that this could not be discussed at this stage for reasons of security but in his mind as the bidding progressed he would expect to see the final price dropping.

DOE was working itself on a figure of something in the region of “R2.75 to R2.80 a unit” before bidding opened. This may go down, he said, but the final price had to apply to all involved in all bids.

Aphane confirmed in answer to questions that the “position with regard to legal difficulties on the licensing of independent operators with NERSA, the national energy regulator, had been resolved”.

Further questioning from parliamentarians resulted in Aphane confirming that the current IPP energy exercise was not in any way connected to the South African government overseas investment exercise with foreign companies on energy renewables, known as SARi.

On finance, once all bidding was completed, the three windows were closed and the final results were known and contracts granted, Aphane said, DOE was particularly aware of the problem of a sudden importation into South Africa of a large quantity of equipment from overseas and the effect this might have upon the rand.   Steps were in hand to counter this, probably by phasing in start dates.

Final questioning came from parliamentarians on the issue of land once again, particularly when the issue of litigation by present land owners arose either on matters of expropriation or proximity.

Aphane said that DOE could not be involved in such matters, which were the supplier’s problem.  However, broadly speaking, if any such problem arose in terms of it becoming a national problem, it would then naturally become a “South African problem as a whole” and this would have to be dealt with. DOE would monitor the situation.

The exercise regarding the “whole question of smaller 100MW or less, self-sustaining and possible minor contributions to the national grid” would be studied at a later date, he said.

Posted in Electricity, Energy, Finance, economic, Fuel,oil,renewables, Land,Agriculture, Mining, beneficiation, Public utilities, Trade & Industry, Uncategorized0 Comments

Budget cuts “a threat to nuclear safety”, says nuclear regulator

With such an important mandate as nuclear safety and nuclear oversight as their responsibility, Adv. Boyce Mkhize, CEO at the office the National Nuclear Regulator (NNR), told parliamentarians that the authority had been underfunded by Treasury in the current Budget to the tune of some 25% for this and the next  two years, which fact he maintained “threatened the nuclear safety of the country”.

He was addressing the portfolio committee on energy on the NNR strategic plan and expenditure budget for the coming year, stating that the mission statement for the NNR was to “provide and maintain an efficient and regulatory framework for the protection of persons, property and the environment against nuclear damage”.

He called on Parliament to bring forward to government’s attention the underfunding by National Treasury, saying that as South Africa went forward into a new era involving the application of  its soon to be chosen nuclear applications there had to be appropriate funding available for the regulator to “do the job properly”.

“I cannot say for sure that we can discharge our duties in terms of nuclear safety for South Africa in terms of the appropriations we have received. In terms of the projects we are involved in and the responsibilities we have, the situation is far from satisfactory.    Projects that need oversight are not only new nuclear installations and replacements but the rehabilitation of old mining areas to protect workers and inhabitants, overview projects which never might see the light of day”.

Adv. Mkhize the NNR’s goals were an effective regulatory oversight; to strengthen stakeholder relations and to enhance the NNRs corporate image communicating with the public on issues of nuclear safety.   At the same time the NNR had to ensure its own financial viability and sustainability.

This is, he said, NNR could not do without a human resource capital budget for the kind of trained staff that the authority needed.    Already, he said, the NNR had exceeded expenditure in terms of the appropriation allowed for.

The NNR was an important pillar in the South African nuclear framework and the continuing work that is going on and about to happen governing the use of nuclear technologies was essential, Adv Mkhize said.

“NNR shall continue as well to police and be accountable to government by ensuring that production of nuclear materials and matters relating to national nuclear technology are not deployed into any areas that do not include the peaceful and safe use of nuclear energy and in observing international agreements.”

“We have also to engage with the public to educate them on issues regarding the disposal of nuclear waste, deal with matters relating to inspections and enforcement of regulations that are set and to monitor in the interests of national security and safety.”

On issues ahead, Adv Mkhize said that key projects in 2013 included oversight of the replacement steam generator replacement at Koeberg; the provision of a nuclear usage manual for South African applications, which was about to be launched by NNR regarding regulatory standards on the use of nuclear technology, and the continued assessment of risk management.

Other matters relate to the handling the rehabilitation of such derelict mining areas such as Wonderfonteinspruit and many other areas in South Africa involving old mines which were of danger to public safety in nuclear terms.   Early engagements on South Africa’s future nuclear programme, given the generic name by Adv. Mkhize as “New Build”, had already started. Part of this had been to monitor the disaster at Fukushima, from the time it occurred and to apply lessons learned to the South African situation. There had been close co-operation between South Africa and the International Atomic Energy  Agency (IAEA on the post-Fukushima learning curve.

Adv. Mkhize told parliamentarians that at Koeberg, Eskom has undertaken exercises on future disaster scenarios, bearing in mind the low lying positions of both the Koeberg and Fukushima standby diesel generating plant, this issue having been resolved at Koeberg, despite completely different geological conditions.

Scenarios regarding breakdowns of systems and supply have been investigated and a full report from Eskom is was currently in the hands of NNR, Adv Mkhize confirmed.

In answer to questions, Adv. Mkhize said that Koeberg as a nuclear generating plant in its new form would probably have another thirty years life. He confirmed that it had been decided that the replacement of the steam generator system at Koeberg  was a “do-able” exercise and NNR was looking forward to its involvement in the start of this programme, once the permission to start was provided.

Adv. Mkhize said that the establishment of an independent nuclear laboratory for the NNR was another most important part of the oversight process but this was also affected by budget restraints.

The energy portfolio committee undertook to assist the NNR in its appeal for further funds, provided that NNR provided Parliament with a clear justification for the additional sums needed, over and above the budget allocated by National Treasury.

Posted in Cabinet,Presidential, Electricity, Energy, Finance, economic, Fuel,oil,renewables, Health, Public utilities, Security,police,defence, Trade & Industry0 Comments

Gas Act changes closer to implementation

Following the November 2011 LP Gas conference in Johannesburg, the minister of energy , Dipuo Peters, has revealed in a written reply to a parliamentary question that  the energy department is in the process of finalising a liquefied petroleum gas (LPG) strategy in the form of a new Bill to be introduced shortly.

Cabinet’s approval will be shortly sought and the result opened up for public comment, she said.

The minister indicated that she intended to table the bill in Parliament before the end of the current financial year, saying that the review process at the conference in 2011 had enabled her department to study “some of the challenges experienced by current and prospective players in the gas industry, as well as shifts in the industry landscape”.

At the end of the conference, she told the media that a strategy was being drawn up as part of government’s response to challenges of over-dependence on electricity and greenhouse gas emissions and that she wished to encourage low income households to move from paraffin and “biomass” to LP gas, wanting to see1.5 million households using LPG by 2016.

She also told the National Assembly in her responses that clarity had to be sought on issues involving the importation, storage and distribution of both LNG and CNG and that PetroSA and iGas would consider importing LNG.   Dealing with another question, minister Peters confirmed that her department was drawing up a “road map for the energy sector” on energy and climate change, which plan would be implemented in the next financial year.

Posted in Communications, Energy, Finance, economic, Fuel,oil,renewables, Land,Agriculture, Mining, beneficiation, Public utilities, Trade & Industry0 Comments

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