KwaZulu-Natal Business 2017-18 edition

OVERVIEW Oil and gas

OVERVIEW Oil and gas Richards Bay is set to become an energy hub. National government’s allocation of 3 126MW to natural gas in its medium-term energy policy to 2030 could set Richards Bay on the path to becoming an energy hub. In 2016 it was decided by the national Department of Energy (DoE) that one of the first two gas-to-power plants to be constructed under the Independent Power Producer Programme (IPPP), would be allocated to Richards Bay. A private partner will invest in and run the plant. To produce its allocation of 2 000MW, the plant would have to use a million tons a year of liquid natural gas (LNG). A new unit within the national Department of Trade and Industry (dti) will focus on importing LNG, with Mozambique and Botswana being the most likely initial sources. Local demand for LNG is expected to increase to more than 10-million tons per annum. The fact that neighbouring Mozambique has significant offshore deposits is relevant in the view of the CEO of the Richards Bay Industrial Development Zone (RBIDZ), Pumi Motsoahae. As he says, “We recognise that Richards Bay is geographically well advantaged, located as it is on the east coast. Richards Bay possesses a phenomenal opportunity to become an energy hub.” SECTOR INSIGHT Liquid natural gas is the next big thing. • 75% of Chevron has been sold for R12.6-billion. The RBIDZ signed an agreement in 2015 with Byromate to produce 60MW from a biomass plant, and manufacturing in the solar sector is another option within the broader energy field. The regulator and promoter of oil and gas exploration in South Africa, Petroleum Agency South Africa, has awarded coalbedmethane-gas exploration rights in KwaZulu-Natal to NT Energy KWAZULU-NATAL BUSINESS 2017/18 76

OVERVIEW Africa, which has a partnership with the Central Energy Fund. These awards are for onshore exploration. The Petroleum Agency SA is an agency of the national Department of Energy. Sinopec of China has bought a 75% share in Chevron South Africa for R12.6-billion. Assets include a lubricants plant in Durban, an oil refinery in Cape Town and 820 petrol stations across South Africa and Botswana. Assets KwaZulu-Natal is home to two major oil refineries, and is the first link in the pipeline chain that links Gauteng province, the industrial heartland of South Africa, with vital fuels. The Port of Durban handles 80% of South Africa’s fuel imports. KwaZulu-Natal is thus a key player in the country’s oil and gas industry. KwaZulu-Natal’s two oil refineries are important regional and national assets as their joint production accounts for more than 300 000 of the 700 000 barrels of refined crude oil that South Africa produces. South Africa’s biggest refinery is Sapref. Owned jointly by Shell SA Refining (25%), Thebe Investments (25%) and BP Southern Africa (50%), it has the capacity to produce 180 000 barrels per day. The refinery also makes propylene feedstock, solvents, sulphur, asphalt, industrial-processing oils and liquefied petroleum gas. Sapref has started a clean-fuels project, aiming to reduce sulphur and benzene levels, among other things, in fuel products. The modifications to the refinery will bring it into line with the tougher legislation regarding fuel production that is in the pipeline. The Enref refinery owned by Engen can produce 135 000 barrels per day. This sophisticated refinery can convert light and heavy crude oil into high-value products that include jet and diesel fuel, solvents, bitumen, sulphur, bunker oil and aviation gasoline. Safor is a base-oil production facility (jointly owned by Engen, Caltex and Total but operated by Engen) that produces 45% of Southern Africa’s base oils. Engen also owns the adjoining Lube Oil Blend Plant, which produces more than 72-million litres of finished lubricants annually. KwaZulu-Natal has the second-highest consumption of diesel fuel of South Africa’s provinces (17.8%) and the third-highest consumption of petrol (15.4%). Royal Vopak, which runs a large terminal at the Port of Durban, has expanded capacity to 174 000m³ and is planning to grow its ability to store fuel still further. It is also planning a new storage facility at Heidelberg that will cater for petroleum and chemicals. Towns along the N3 highway are increasingly receiving investments in the logistics sector. Getting fuel to the province of Gauteng is the key mission of the new multi-purpose pipeline (NMPP) which started delivering fluids in 2012. The NMPP terminals allow for greater flexibility in supply. Refined products such as jet fuel, sulphur diesel and both kinds of octane petrol are carried. The infrastructure of Transnet Pipelines apparently reduces the number of fuel tankers on South African roads by about 60%. The liquid fuels and gas networks of Transnet Pipelines traverses KwaZulu-Natal from west to east and north to south. The petroleum network has intake stations at both Durban refineries, while the gas pipeline runs from Secunda to Durban, with diversions to the manufacturing hubs of Newcastle and Richards Bay, and along the coast between Durban and Empangeni. Transnet Pipelines employs 658 staff, with about 200 located at the head office in Anton Lembede Street in downtown Durban. CONTACT INFO Independent Power Producer Programme: www.ipp-projects.co.za National Department of Trade and Industry: www.thedti.gov.za National Energy Regulator of South Africa: www.nersa.org.za Petroleum Agency SA: www.petroleumagencysa.com South African National Energy Association: www.sanea.org.za South African Petroleum Industry Association: www.sapia.co.za Transnet Pipelines: www.transnetpipelines.net 77 KWAZULU-NATAL BUSINESS 2017/18