Minister Mantashe toe tapping on energy issues

.……article posted 25 June 2021……

Too many ideas and no decisions at all…..     

In a parliamentary energy committee meeting, it was decided to hold over a vote to investigate the Karpowership SA tender award granted by the Department Mineral Resources and Energy (DMRE) to supply some 2000MW to the SA national grid in terms of their IPP “risk mitigation” programme.

The Department Mineral Resources and Energy (DMRE) plan is to allow 3 power supply vessels with support maritime units located at the ports of Saldanha Bay, Richards Bay and Ngqura as floating regasification units under a state contract to last 20 years at a cost over the period of R218bn. Environmental reports were apparently awaited. The committee wanted to know how the tenders had got so far without them.

As reported in the media in many subsequent articles, it is incorrect that the Democratic Alliance was outvoted by a majority count that a probe be conducted immediately by Parliament into the manner and circumstances behind the decision to make the award to Karpowership SA. In fact what was decided by majority vote was that the energy committee was not the vehicle for such an investigation.  If was decided that it should be a decision of the  parliamentary public accounts committee (SCOPA) whether or not to investigate..

Pass the cushion

The meeting, on day-one of three, was attended by Minister Gwede Mantashe who responded personally to the majority of questions.  Subjects over the three days ranged from the merger of a state gas and oil energy utilities; development plans for nuclear energy; and the failure of the R73m state solar heating project and matters involving Mintek .

MPs also queried the Ministers confirmation that in the current  financial year, the DMRE will be issuing a request for proposals for 2600 megawatts from wind and solar energy, a portion of Bid Window 5.   Kevin Mileham (DA) asked how often, over the next five years, did the department anticipate opening such bids, bearing in mind that Parliament has been told that there will be another in the third quarter of 2021, but the Integrated Resource Plan (IRP) indicates that there should roughly one every year.

Three in all

Minister Mantashe acknowledged that bid No 5 had already been gazetted, a Bid No 6 would be published in August with Bid No 7 in February 2022. This last bid will proceed based upon demand and the economics of the time, he confirmed.   He was adamant there would be two bid windows in this calendar year and one early next year, ”whatever the media might say, the department in any case will be re-examining the situation and will proceed from there”.

Sibusiso Kula (Kulasegaran – ANC)  wanted to know “when the whole renewables programme would be kickstarted, as there were many ventures waiting in the wings”.  He said that DMRE had intimated a total of 11 800 megawatts of power from all renewable energy sources was required and this obviously was in addition to the current subject matter of  2 600 megawatts.

On this issue, DDG Jacob Mbele in charge of programmes and projects, confirmed that bid window periods on wind and solar were staggered. This was because projects seemed to need a development period of at least 18 months each.  However, in terms of overall requirements of 11 800 megawatts covering all requirements from 2022 up until 2024/25, this included gas in its various forms.  The commissioning of such additional capacity was to take place in terms of proposals (RFPs) issued in the coming months.

Beyond one’s pocket

In response and on the subject of the intended purchase of limited nuclear power, Kevin Mileham said that the IRP emphasised that any procurement of the 2 500 megawatts of new nuclear power will be at a pace and scale that the country could afford.  With Eskom and the country in financial straits for a whole number of years, it would not seem possible that South Africa therefore could afford any nuclear power in the period covered by the present IRP.  On this MPs looked for an answer.

Also, he pointed out that 2015 nuclear purchase attempt had been challenged in the courts successfully as being way beyond the nation’s means and not a strict financial necessity. The Minister responded with a firm reply that his statement that any nuclear commitment would be on a scale the country can afford meant just that.  He added, “As a result, any move would be in terms of Eskom’s and the country’s financial status”.

He added that DMRE always undertakes a section 34 ministerial determination to test the market as funds for any technology and does not necessarily depend wholly on the SA fiscus for funding.   He said, “When any technology is in demand, many come forward to offer funds. Also, the state in such difficult periods implements a reprioritisation process and undertakes budget cuts in other projects or programmes.”

Any day now

In answer to a query from James Lorimer (DA) on the progress of the Upstream Petroleum Resources Development Bill drafted in 2019, he was told that most DMRE had incorporated “most of the comments that it had received from December 2019 to March 2020”.  DG Jacob Mbele said that the Bill was ready to go to Cabinet for approval for tabling in Parliament.

Tseliso Maqubela, DDG of minerals and petroleum regulation, responded to a number of questions on clean fuels.   He said that on general, refineries had been converted and were able to produce 50 ppm diesel required in terms of IMO 2020 (the International Maritime Organisation rules on sulphur in fuel oil for shipping).    In fact, some companies are already bringing 10 ppm diesel, he said.

“DMRE is thus not presently concerned with the country’s ability to meet IMO 2020 requirements. The Minister has published a regulation which had been developed by the policy branch on clean fuels which is currently out for comment.”

Filling the gap

Unfortunately, Maqubela said, two refineries that were converted after an investment of over R1bn and were lost through fires and explosions.  “In response, DMRE had increased import capacity in anticipation of demand, there being sufficient storage in Durban and Cape Town for 50 ppm diesel.’”

Finally, on the issue of the merger of state oil and gas entities, PetroSA, iGas and the Strategic Fuel Fund operations all currently under the control of Central Energy Fund (CEF), MPs asked when would the resultant formation of a National Petroleum Company be announced?

Minister Mantashe responded, “The department wants to establish first all its options in order to begin developing a structure for the merged entity that will build a new future in the oil and gas industry”. He concluded by saying, “Once a fully-fledged study is held, and based on the options selected, the parliamentary committee will be updated. The department does not want to put the cart before the horse,” he said.



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