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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 Africa’s 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
Calculation Element 2005 Nominal Value Result Share of GVA of Petroleum by other sectors (lost if no fuel available)
R 129,078 million
+ Share of GVA of Transport by other sectors (lost if no fuel powered transport available)
R 64, 791 million
+ GVA share for Petroleum sector itself (loss if Petroleum sector not producing)
R 30.077 million
= Total Economic Impact 2005 figures R 223,945 million x Total GVA / GDP Ratio 1.509 = Total Impact in GDP terms R 337,890 million ÷ GDP Current Price 2005 R 1,523,255 million = Ratio 22.2%
9
Whilst dealing with growth in electricity demand, we need to also worry about replacing existing capacity
H E X R IV E RS A LT R IV E R
C E N T R A L W E S T B A N K
C O LE N S O
C O N G E LLOS O U T H C O A S T
U M G E N I
B R A K P A N
K LIP
R O S H E R V ILLE
T A A IB O S
V A A LV E R E E N IN G IN G
W ILG EW IT B A N KG E O R G E
V IE R F O N T E INH IG H V E LD
K O M A T I
IN G A G A N E
C A M D E N
G R O O T V LE I
H E N D R IN A
A R N O T
G A R IE P
K R IE L
A C A C IA P O R T R E X V A N D E R K LO O F
M A T LA
D U H V A
C A H O R A B A S S A
D R A K E N S B E R G
K O E B E R G
T U T U K A
LE T H A B O
M A T IM B A
K E N D A L
P A LM IE T
M A J U B A
0
5 , 0 0 0
1 0 , 0 0 0
1 5 , 0 0 0
2 0 , 0 0 0
2 5 , 0 0 0
3 0 , 0 0 0
3 5 , 0 0 0
4 0 , 0 0 0
5 5 6 0 6 5 7 0 7 5 8 0 8 5 9 0 9 5 0 0 0 5 1 0 1 5 2 0 2 5 3 0 3 5 4 0 4 5 5 0 5 5 6 0
Y e a r
Me
ga
wa
tt I
ns
tall
ed
5 5 6 0 6 5 7 0 7 5 8 0 8 5 9 0 9 5 0 0 0 5 1 0 1 5 2 0 2 5 3 0 3 5 4 0 4 5 5 0 5 5 6 0
Electricity supply options
10
Economy “drives” Energy (Oil)
1st Oil crisis, OPEC
2nd Oil crisisAsian crisis
Kuwait war
11
World Oil Reserves
ThousandMillionbarrels
12
Liquid fuels supply issues
End of oil will demand a change in how we deal with transport
13
Supply Transform Transport End UseOil
Natural Gas
Coal
Gas
ElectricityEskom
and Others
Coal
PetroSA
Export
Sasol
Road/Rail
Pipeline
OilRefineries
RailRoad
Pipeline
LiquidFuels
Biomass WoodPerson/Road
HydroNuclear
Transmission Wires
“Washing”
Koeberg
RSA primary energy supply
14
0
50
100
150
200
250
300
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030
Qua
drill
ion
Btu
Oil
Natural Gas
Coal
33%
27%
9%Renewables
Nuclear
26%
5%
Share of WorldTotal
History Projections
38%
24%
24%
8%
6%
World projected energy use by fuel type(1980 - 2030)
15
World Liquids Production
Non-OPEC Conventional
Non-OPEC Unconventional
OPEC Conventional
OPEC Unconventional
0
20
40
60
80
100
120
2000 2010 2020 2030
(mil
lio
n b
arr
els
per
day)
Source: eia March 2007
16
World Liquids ProductionUnconventional Liquids
Canadian Oil Sands
Ultra Heavy Crudes
Biofuels
Coal-To-Liquids
Gas-To-Liquids
Shale Oils
0
2
4
6
8
10
12
2000 2010 2020 2030
(mil
lio
n b
arr
els
per
day)
Source: eia, March 2007
17
0
10
20
30
40
50
60
70
80
Oct
'04
Nov
Dec
Jan '0
5Fe
bM
arApr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan '0
6Fe
bM
arApr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan '0
7Fe
b
US$ p
er
barr
el
Estimated bitumen price netback
Light crude oil price quoted in media(West Texas Intermediate)
Heavy crude oil price at Hardisty
Comparative light, heavy and bitumen crude oil price
Source: eia, March 2007
18
Energy Security Framework
Energy security is not only about security of supply
Energy infrastructure
planning Energy security
Macro-economic
framework
Climate change (mitigation & adaptation)
Demand management
Standards & specifications
Local production
Reserve margins
Diversity of supply
Import & Export
policies
Foreign relations
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
PlanningAn integrated planning approach is to ensure that all the constituting elements are addressed in a coordinated manner
ModellingAn integrated energy modeling capability which would be instrumental in the development of energy plans and evaluation of options that are proposed by policy-makers
RequiresRequires
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
Entity 1 Entity 2 Entity ...Entity 3
Coordination
Entity... Entity n
Integrated Energy Planning
Policy Options,
Strategies
Other Factors
Unbiased- Modelling
Government Depts, SOEs
Modelling Agency
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
ModellingScenarios/
Options
Policy Decisions
Political & Other Factors
Integrated Plan
Individual Sectoral
Plans
Energy Planning and Modelling Process
Annual Forecasts
Political & Other Factors
26
Modelling vs 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
Modelling Planning
27
Refining
28
Refining Competition for Available Flows
Africa
FSUNorth America
Latin America
Europe
Middle East
Pacific Asia
MT in 2004
RSAIsolated
from available
flows
Petrol
6
19
4
4
25
33
Diesel & Jet
South Africa is a PRICE TAKER – our level of oil trade is far too small to influence global or regional Crude or Product prices
Inter Regional Flows OnlyInter Regional Flows OnlyNot Intra Regional FlowsNot Intra Regional Flows
29
Key refining issues
South Africa has run out of refining capacity
Total Market Demand / Supply
-50.00
-30.00
-10.00
10.00
30.00
50.00
70.00
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Bil
lio
ns
Lit
res
-50.00
-30.00
-10.00
10.00
30.00
50.00
70.00
Bil
lio
ns
Lit
res
Nett Product Required Product Supply Product Demand
Supply surplus
Supply shortage
30
•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
•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
Analysis Graphs
Refinery Capacity - Long term supply solutions
The impact of new CTL plants on Imports - 100% utilization on Day 1
•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
•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
Key Issues
Net imports with 200 kbpcd crude refineries
0
5000
10000
15000
20000
25000
Mlp
a
.
P90
P50
Net imports with 80 kbpcd CTL plants
0
5000
10000
15000
20000
25000
Mlp
a
.
P90
P50
Source: FSSTT study (November 2006)
31
Ports
32
•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
Ports issues
33
Ports issues
Ports have adequate capacity until 2025
0
2
4
6
8
10
12
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
Number of Ships Into / Out of Durban for the Period 2006 to 2025
Namibia exDurban
PE and EastLonden exDurban
Imports intoDurban
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 OCGT’s
– 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
Analysis Graphs
Rail status quo
0
1000
2000
3000
4000
5000
6000
2006 2007 2008 2009 2010
Mlp
a
.
0
50
100
150
200
250
300
350
40 K
l lo
ads
per
day
.
Rail
Road
*4.5% growth and excludes jet by rail to ORTIA
Potential rail improvement plan
0
1000
2000
3000
4000
5000
6000
2006 2007 2008 2009 2010
Mlp
a
.
0
50
100
150
200
250
300
350
40 K
l loa
ds p
er d
ay
.
Rail
Road
• 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
Source: FSSTT study (November 2006)
Inland supply (road & rail)
41
Inland supply – real rail issues
Total Journey Times (Days)
1
19
27
36
44
42
28
30
1617
7
4
12
10
1
0
5
10
15
20
25
30
35
40
45
50
4.00 6.09 8.19 10.28 12.38 14.47 16.56 18.66 20.75 22.85 24.94 27.03 29.13 31.22 33.32 35.41 More
Time - days
Fre
qu
ency
of
Occ
ure
nce
42
Inland supply – real rail issues
Rail Tank Cars Standing Full
1
16
29
21
28
26
32
28
18 18
9
14
11
78
54
0
5
10
15
20
25
30
35
0.00 0.68 1.35 2.03 2.71 3.39 4.06 4.74 5.42 6.09 6.77 7.45 8.13 8.80 9.48 10.16 More
Time (days)
Fre
qu
ency
of
Occ
ure
nce
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
INDIANOCEAN
FYNNLAND
HOWICK
LADYSMITH
BETHLEHEM
VOLKSRUST
NEWCASTLEKROONSTAD
KLERKSDORP
WITBANKKENDAL
WALTLOOPRETORIA WEST
SECUNDA
STANDERTONCOALBROOKSASOLBURG
SCHEEPERSNEK
MAHLABATINI
HILLCREST
TARLTON
LESOTHO
NATAL
FREE
STATE
GAUTENG
ø406,4 (16”)
ø323,8 (12”)
QUAGGA
ø457,2 (18”)
N
RUSTENBURG
MAGDALA
NORTH - WESTMPUMALANGA
KWAZULU /
VRYHEID
RICHARDS BAY
BHT
MEYERTON
VAN REENEN
DUZI
INGOGO
WILGE
LANGLAAGTE
FORT MISTAKE
EMPANGENI
MOOIRIVER
JAMESON
ø502 (20”)
ø457,2(18")
ø323,8 (12”)
Ø219,1 (8”)
Ø219,1 (8”)
ø323,8 (12”)
Ø219,1 (8”)
Ø406,4 (16”)
Ø457,2 (18”)
18”
ø323,8 (12”)
Ø457,2 (18”)
DURBAN
DOUBLE PUMP STATION
DELIVERY STATIONS / METERS
PUMP STATIONS
REFINED PRODUCTS
CRUDE OIL
GAS
AVTUR
ø323,8 (12”)
ø457,2 (18”)Ø406,4(16”)
PARK
ø457,2 (18”)
ø406,4 (16”)
ø323,8 (12”)
CAPE TOWN
INTAKE STATIONS
NMPP PIPELINES
NMPP PUMPSTATIONS
NMPP TERMINALS
Ø
MNGENI
ELARDUS PARK
AIRPORT
DECOMMISSIONED DJP
PPT-1645-/B
ALRODE
VREDE“T”
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 Petronet’s 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 shortagesProduct Volumes in
millions of Litres3rd Quarter
2005 3rd Quarter
2006 % Change
2006/05 3rd Quarter
2007 % Change
2007/06 PETROL 2797 2754 -1.5 2908 5.6
DIESEL 2026 2200 8.6 2495 13.4
JET FUEL 523 545 4.2 581 6.6
ILLUM PARAFFIN 200 192 -4 190 -1
FUEL OIL 125 124 -0.8 124 0
BITUMEN 71 72 1.4 79 9.7
LPG 154 167 8.4 191 14.4
SUM OF ABOVE 5896 6054 2.7 6568 8.5
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 Petronet’s 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
I Thank You
