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Energy Security Masterplan

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... macroeconomics, geopolitics and climate change ... INDIAN OCEAN FYNNLAND HOWICK LADYSMITH BETHLEHEM VOLKSRUST NEWCASTLE KROONSTAD KLERKSDORP WITBANK ... – PowerPoint PPT presentation

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Title: Energy Security Masterplan


1
Energy Security Masterplan Phase 1
  • Parliament Portfolio Committee Presentation
  • 18 June 2008

2
Introduction - Energy Masterplan
  • Developing an integrated energy Masterplan in 2
    phases (electricity and liquid fuels)
  • Some issues in liquid fuels sector could not wait
  • Phase 1
  • Energy Security framework
  • Energy planning approach
  • Liquid fuels short to medium plan
  • Phase 2
  • Presented in October 2007

3
Introduction Masterplan (Phase 1)
  • In the short-term
  • the Master Plan focuses on developing supply
    chain solutions to South Africas liquid fuels
    supply challenges, management of liquid fuels
    demand and emergency response tactics.
  • In the medium to long-term
  • the approach is broader and begins to integrate
    supply, demand, macroeconomics, geopolitics and
    climate change

4
Introduction Masterplan (Phase 1)
  • The Masterplan seeks to allow for the making of
    well-informed choices in respect of energy
    supply, energy carriers, demand sector
    strategies, as well as energy transformation
    approaches, cognisant of the need to minimise
    negative impacts on the environment and the
    economy

5
Presentation Outline
  • Energy security framework
  • Energy planning approach
  • Liquid fuels industry short to medium plan
  • Review of key findings
  • Proposed interventions
  • Special considerations

6
Energy Security
7
Energy Security - definition
  • Energy security means ensuring that diverse
    energy resources, in sustainable quantities and
    at affordable prices, are available to the South
    African economy in support of economic growth and
    poverty alleviation, taking into account
    environment management requirements and
    interactions among economic sectors.

8
GDP loss due to fuel supply interruptions
  • Based on 2005 terms, South Africa would lose R925
    million per day if there is no fuel

9
Electricity supply options
  • Whilst dealing with growth in electricity demand,
    we need to also worry about replacing existing
    capacity

10
Economy drives Energy (Oil)
1st Oil crisis, OPEC
Kuwait war
2nd Oil crisis
Asian crisis
11
World Oil Reserves
Thousand Million barrels
12
Liquid fuels supply issues
End of oil will demand a change in how we deal
with transport
13
RSA primary energy supply
Supply
Transform
Transport
End Use
Oil Refineries
Rail Road Pipeline
Liquid Fuels
Oil
Natural Gas
PetroSA
Gas
Pipeline
Sasol
Export
Road/Rail
Washing
Coal
Coal
Eskom and Others
Electricity
Transmission Wires
Hydro
Koeberg
Nuclear
Biomass
Wood
Person/Road
14
World projected energy use by fuel type(1980 -
2030)
15
World Liquids Production
Source eia March 2007
16
World Liquids ProductionUnconventional Liquids
Source eia, March 2007
17
Comparative light, heavy and bitumen crude oil
price
Light crude oil price quoted in media (West Texas
Intermediate)
Heavy crude oil price at Hardisty
Estimated bitumen price netback
Source eia, March 2007
18
Energy Security Framework
  • Energy security is not only about security of
    supply

Local production
Foreign relations
Reserve margins
Climate change (mitigation adaptation)
Energy infrastructure planning
Energy security
Standards specifications
Demand management
Diversity of supply
Macro-economic framework
Import Export policies
19
Energy modelling planning
20
The proposed energy modelling planning
approaches
  • Provision of high-quality, energy information, in
    a manner that promotes sound policymaking,
    efficient markets and public understanding, to
  • Cabinet
  • National, provincial local governments
  • Markets
  • the public
  • Meeting of this challenge requires
  • Adoption of transparent approach, methodology and
    presentation of results
  • Avoidance of developing or advocating positions

21
Integrated Energy Planning and Modelling
  • Provision of high-quality, unbiased energy
    information, in manner that promotes sound
    policymaking, efficient markets and public
    understanding, to
  • Cabinet
  • National, provincial local governments
  • Markets
  • the public

Requires
Requires
Planning An integrated planning approach is to
ensure that all the constituting elements are
addressed in a coordinated manner
Modelling An integrated energy modeling
capability which would be instrumental in the
development of energy plans and evaluation of
options that are proposed by policy-makers
22
Integrated Energy Planning and Modelling
  • Separation of modeling, planning and coordination
  • Decentralised planning by various entities
  • Coordination and integration of such planning
    done centrally

Coordination
Integrated Energy Planning
Policy
Other
Options
,
Factors
Strategies
Unbiased
-
Modelling
Modelling Agency
Government
Depts
,
Entity
1
Entity
2
Entity
...
Entity
3
Entity
...
Entity n
SOEs
Individual Policies
,
Strategies
,
Plans
,
Infrastructure
23
The modelling process
  • Collect, compile and publish reliable energy
    data, information and analyses
  • Produce short and medium-term energy projections
  • Analyse impact of proposed energy programs and
    policies
  • Prepare reports on energy issues and legislation
    for Cabinet
  • Prepare special analyses on energy issues and
    legislation for the Minister
  • Prepare special analysis for policy making
    departments

24
Energy Modelling System (NIEMS)
25
Energy Planning and Modelling Process
Annual Forecasts
Modelling
Scenarios/ Options
Policy Decisions
Political Other Factors
Political Other Factors
Integrated Plan
Individual Sectoral Plans
26
Modelling vs Planning
Modelling
Planning
  • Should be descriptive and policy-neutral (i.e.
    avoid policy advocacy)
  • Modeling should, as a basis for the development
    of energy plans, be undertaken in such a way as
    to use
  • prevailing policy,
  • legislative arrangements,
  • proven or almost proven technology or industry
    structural conditions
  • Is essentially prescriptive, and not
    policy-neutral.
  • Involves deliberate policy choices, which may go
    beyond empirical evidence
  • Should be about handling of sometimes conflicting
    objectives

27
Refining
28
Refining Competition for Available Flows
FSU
North America
Europe
Pacific Asia
Middle East
Africa
Latin America
Inter Regional Flows Only Not Intra Regional Flows
MT in 2004
29
Key refining issues
  • South Africa has run out of refining capacity

30
Refinery Capacity - Long term supply solutions
Analysis
Graphs
  • In order to meet demand a new 85000 BPCD CTL
    plant is needed every 3-4 years
  • If we relied on a 200000 BPCD crude refineries,
    two refineries can be absorbed.
  • Prior to investments in new capacity, significant
    imports are expected

The impact of new CTL plants on Imports - 100
utilization on Day 1
Key Issues
  • High imports are still periodically required if
    one assumes start-up coincides with 100
    utilisation
  • Refinery economics improve with high initial
    utilisation
  • Government might have to incentive CTL/GTL to
    minimise Balance of Payment concerns

Source FSSTT study (November 2006)
31
Ports
32
Ports issues
  • Initial analysis indicated problems at the ports,
    but further indicates
  • inadequate interconnections between industry
    facilities and berths
  • In adequate discharge and loading rates in the
    system
  • Discharge and loading rates much lower than those
    of vessels and berth loading arms
  • Not all oil companies have access to all berths
  • Berth 9 only - Sasol and Total
  • Berth 7 and 8 - Shell, BP and Engen
  • Management of unplanned incidents
  • Significant volumes when ship cargo is offspec
  • Limited ability to move product out of Durban

33
Ports issues
  • Ports have adequate capacity until 2025

Berth Capacity at 1500 m3/hr Ship Dependant
Discharge Rate 9 ships per week
34
Ports proposed interventions
  • Oil vessels should be afforded as high a priority
    as container vessels
  • The use of the back of port tanks for anything
    other than offloading and loading need to be
    prohibited
  • Back of the port should be operated by an
    independent player
  • TNPA has to address concerns raised by industry
    participants with respect to the current lease
    agreement held by the various oil companies
  • DME to provide regulatory certainty

35
Fuel Storage
36
Storage issues
  • Inability of most storage facilities to receive
    the large pipeline parcels
  • New pipeline capacity expected to exacerbate the
    situation
  • Further depot capacity required for
  • Strategic stock (60 days crude and products)
  • Commercial stock (28 days)
  • Most airports operating at maximum five days
    stockholding versus 30 days global best practise
  • Fuel stock holding for Eskom OCGTs
  • Diesel fuel demand can increase six fold from 5
    load factor to 30 load factor

37
Proposed storage facility interventions
  • Enforce the stock holding by all customer groups
  • Ensure that consumers pay for the stock holding
    costs
  • Include unregulated commercial consumers
  • Correct past inequities
  • Complete review of petroleum pricing framework
  • Limit cross subsidisation all customer groups to
    pay for their own insurance

38
Inland supply
39
Inland supply short term pipeline issues
Pipeline capacity
40
Inland supply (road rail)
Graphs
Analysis
  • At present 25 of the non-pipeline product
    moved inland is by rail
  • Only 30 of deliveries are for coast to inland
  • Unless inland rail transport is increased, more
    than 10 road tankers per hour will have to leave
    Durban for inland in 2010

4.5 growth and excludes jet by rail to ORTIA
Source FSSTT study (November 2006)
41
Inland supply real rail issues
42
Inland supply real rail issues
43
Inland supply - Proposed rail interventions
  • Operational improvements to alleviate potential
    congestion along the supply chain, through
  • Consolidation of the route tankers and route
    substitution
  • Switching to block trains/ block loads thus
    exiting inefficient routes
  • Turnaround time improved from 14 days to 4 days
  • Re-allocation of capacity to the Durban-Gauteng
    corridor
  • Additional costs to be borne by Oil industry
  • Investments in rail sidings
  • Weekend and overtime work

44
Inland supply beyond 2010

45
Inland supply beyond 2010
  • The approval of the NMPP is the most critical
    project for the liquid fuels industry
  • Some changes required to Petronets design
  • Cannot leave the approval process to external
    processes

46
Pipeline sizes costs
47
Current state of affairs
  • Current growth in demand for petroleum products
    used for electricity generation is unsustainable
  • Potential diesel shortages

48
Inland supply proposed pipeline intervention
  • Expedite approval and implementation of the NMPP
  • Implement split tariff approach
  • Direct usage tariff levied on all users
  • Initial reserve capacity financed through
    security of supply levy on all product
  • Raise required state equity participation through
    dedicated levy

49
Summary of recommendations of phase 1 Masterplan
  • Manufacturing of petroleum products
  • Recommend promotion of local production of
    petroleum products
  • Recommend that at least 30 of products be
    manufactured from indigenous raw materials
  • Climate change be considered an important
    component of integrated energy planning
  • Will require data collection and climate change
    monitoring
  • Alignment of our fuels specification and other
    standards (including housing and building
    standards) to global standards

50
Summary of recommendations of phase 1 Masterplan
  • 30 of all crude consumed in South Africa be
    procured through PetroSA
  • Policy of limited imports of petroleum products
    be re-endorsed
  • Energy efficiency be strongly promoted in all
    energy consuming sectors of the economy
  • The energy demand management approach should
    include appropriate selection of energy carriers
  • Demand management requires appropriate demand
    sectors strategies, starting from the industrial
    strategy through to appropriate transport
    strategies
  • Level of coordinated infrastructure investments
    planning

51
Summary of recommendations of phase 1 Masterplan
  • Keep certain levels of strategic stocks
  • Airlines to be forced to keep certain stocks
  • Eskom to keep stocks for OCGTs
  • Approve Petronets new Multi Product Pipeline
    project
  • In the short term, rail should be operated in
    block train format, so as to improve rail turn
    around times
  • Also prioritise Durban to Gauteng route

52
Summary of recommendations of phase 1 Masterplan
  • The management of the back-of-the-port
    operations should be run by an independent
    operator
  • Most importantly, South Africa must build
  • an ability to develop properly thought-out energy
    plans
  • a tool to evaluate proposed energy related
    policies

53
Overall Project Status
  • Consultants appointed to manage overall
    implementation of programme in September 2007
  • Initial briefing meeting with oil industry
    executives in December 2007
  • Governance structure formalised
  • Project kick-off workshop in December 2007
  • Key deliverables identified
  • Task teams for each stream identified
  • High-level steering committee in March 2008
  • Accession to PDR
  • Follow up project workshop in March 2008
  • Task teams for each workstream formalised
  • Task-team project meeting currently in progress
  • Detailed implementation schedule from each task
    team due end May 2008
  • Ongoing implementation and monitoring

54
I Thank You
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