Transcript Objective

LPG SUPPLY SITUATION IN SOUTH AFRICA
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LPG SUPPLIES
ONLY INNOVATION WILL IMPROVE SECURITY OF
SUPPLY OF LPG AS A CLEANER, CHEAPER
ALTERNATIVE TO OTHER FUELS
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LPG SUPPLIES
Gas should be the main thermal fuel
in all domestic and small commercial
and industrial applications -- as it is
in most of the world.
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GAS LIFE CYCLE
LPG is at the start of a natural progression:
1.
2.
3.
4.
5.
Initially LPG is used in all applications
Next LNG is used for industry and power generation
Then, use of LNG spreads to energy-dense areas around
larger customers, and from there to adjacent domestic and
commercial users
Piped natural gas comes in from distant supplies with LNG
imports as back-up
Finally, LPG falls back to domestic and small commercial
users off the grid.
This process will take 20 to 30 years
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SUPPLY IS THE PROBLEM!
• Refinery problems
• Import capacity is very limited
• Storage is very limited
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LPG’S POTENTIAL
• Within 3-5 years it could replace electricity in all domestic
and small commercial applications
• LPG is already 30% cheaper than electricity and will get
even cheaper – (as it is already elsewhere)
• LPG could replace the need for one Madupi at a fraction of
the cost
• LPG could quickly change our CO2 emissions profile
• LPG can replace paraffin in low-income homes
– it is a safe, clean and modern fuel – paraffin is not
– Surplus paraffin could reduce pressure on our jet fuel supply
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REFINERY PROBLEMS
Refineries are our main source of LPG
But locally there is under investment in capacity because:
• Overcapacity in the Indian ocean means low refining margins
• Local refineries are mostly small, old and not internationally
competitive
• Local refineries’ economics do not justify investment to meet EU
fuel specifications
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REFINERY PROBLEMS
OTHER REFINERY PROBLEMS
• Local refineries cannot meet growing LPG demand
• Scheduled shut downs typically occur in winter
• Electricity failures cause disruptions
• Refinery gate price regulation means better economics
can be achieved using gas molecules to produce other
products.
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EXISTING IMPORT
FACILITIES
• Existing import facilities are inadequate and limit the
ability of LPG to serve our economy
• No terminal in Cape Town -- a major market
• Lack of storage makes the supply system
unstable(Gauteng run on less than a days stock in winter)
Location
Richards Bay
Owner
IVS (Afrox)
Capacity
3.6kt
Durban
BP/Shell
PE
Shell
1.0kt
East London
BP (mothballed)
0.5kt9
<1.5kt
A ROLE FOR
KAYAGAS?
Is there room for an entrepreneur like KayaGas to design and
implement solutions?
• Yes, because reliance on oil/gas industry vested interests to meet
the challenge of a developing economy has failed
What role can Parliament play?
We respectfully suggest Parliament should critically examine the
following:
•
•
•
the existing regulatory framework
the manner in which the civil service functions around this situation
the record of the major energy companies in the LPG market
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REGULATIONS
At least six licenses or permits are required for a new
LPG import installation
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•
•
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Petroleum Products Act: Wholesale licence
Petroleum Pipelines Act: Facility licence
Petroleum Products Act: Import guidelines: Import permit
National Environmental Management Act: Authorization following
impact assessment
• National Ports Authority Act: Concession from the Ports Authority
• Marine Safety Act: Permission from SA Maritime Safety Association
for ships to enter territorial waters
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WHY SO DIFFICULT?
Viewed individually there does not appear to be deficiencies in policy,
regulatory framework or executive capacity. Why does an entity like
KayaGas find it so difficult to introduce innovative solutions?
ANSWER:
• the lack of a clear and final Government strategy for LPG
• the combination of the extensive set of regulations hamstrings any
developer even if they are implemented efficiently.
• the lack of co-ordination between regulatory authorities /government
entities and the unintended consequences produced by this
• the way in which the structure and content of regulatory approval
procedures enable vested interests to hi-jack proposed solutions
The effect of this is that even a small development can
be delayed by years and block the supply of energy and
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economic development in South Africa
NATIONAL LPG PRIORITIES
• Finalise the National LPG Strategy
• Build two LPG import terminals – Richards Bay and
Saldanha Bay
• Inland storage of LPG in Gauteng
• Fast-track licensing of filling plants to prevent crossfilling of cylinder and encourage investment in cylinders
• Provide poor households with an incentive to switch to
LPG
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