A few weeks ago, a liquefied petroleum gas (LPG) carrier sailed into Saldanha Bay having received, a few days earlier, a shipment of gas from a large gas carrier while in the Indian Ocean off the Mozambican port of Beira.
The arrival of Botafogo Gas in Saldanha Bay attracted little attention, but it was almost certainly a landmark, even historic, development towards the dawn of a full South African gas economy.
Natural gas and its refinery derivative, LPG, are plentiful, affordable and clean (gas emits about 50% less CO² than coal). But whereas the world relies on gas to provide over 20% of its energy needs, the figure for SA is lower, at about 3%. And, within the country, there are considerable geographic variances, the Western Cape using far less than the national figure at about 3kg-4kg per person a year. To put that number into perspective, Brazil and Malaysia, similar developing countries, consume eight times and 13 times as much LPG per capita, respectively.
The good news, however, is that SA is now — potentially — on the brink of developing a full gas economy, the beginning of the large-scale importation of LPG being the "pointy end" of such a process.
Developing a gas economy would have positive implications for SA: it can change our energy landscape, obviate regular cyclical and regional shortages and provide a new, cleaner feedstock that can be used for power, industry, transport and domestic applications.
Measured in kilograms per capita, provincial consumption may be low, but the Western Cape has an existing, pent-up demand for LPG, said to be in the order of 11,000 tonnes a month. Very often, especially in winter, Cape Town and surrounds run out of gas, a shortfall that not uncommonly amounts to 5,000 tonnes a month.
The problem has been prosaic and simple: our local refineries produce tiny quantities of LPG, SA is still to find natural gas and liquefied natural gas (LNG) has yet to be imported. But, largely unannounced, LPG has begun to be imported and unloading, storage and transport infrastructure is taking shape.
In April, the Competition Commission released a report on its market inquiry into the LPG sector. The commission found that the main obstacle to getting affordable imported LPG to the households and businesses that needed it was the cost of logistics. And costs were high because SA had little in the way of large-scale import-and-storage infrastructure. To quote from the commission’s report: "to encourage the sustainable supply of LPG throughout the year, the focus of this [LPG] sector should be on constructing larger import and storage facilities".
Globally, the production of LPG is growing and prices are falling. For now, the cost-benefit case for importing gas including LPG, on a large scale is compelling. It’s "happy hour" for gas.
While LPG is helping to establish a domestic gas market of size, SA could be looking at LNG imports.
But a number of key dots need to be joined. These include enacting important Mineral and Petroleum Resources Development Act amendments, issuing exploration licences, providing greater clarity on the announced LNG import programme and exploring for indigenous gas.
But the arrival of LPG certainly represents a bit of good news for a change: working with the public sector, private investors are at last stumping up the capital needed to make possible much larger imports of LPG.
In Richards Bay, investment reportedly running to R1bn by Petredec and Bidvest is planned to upgrade and expand storage capacity and the R1bn Sunrise Energy terminal into which the Botafogo Gas discharged its LPG is already up and running, while a second storage facility in Saldanha, belonging to Avedia Energy, is on the cards.
With a throughput capacity of almost 200,000 tonnes of LPG in its first of three phases, Sunrise Energy (60% owned by Royal Bafokeng Holdings subsidiary the Mining, Oil and Gas Service Sector Company, and 31% by the Industrial Development Corporation) is finally catalysing investment in LPG-importing capacity.
Importantly, with these developments, monopolies are unlikely as are the kinds of market distortions that the Competition Commission exists to counteract.
Open market access is enhanced, as is supply and certainty, with the National Energy Regulator of SA independently setting maximum import and storage tariffs.
Almost no one noticed Botafogo Gas’s arrival and its discharge of 2,450 tonnes of LPG into the Sunrise Energy terminal on May 29, but it was an event of great significance for us as a country.
That first shipment signalled the real beginnings of a broad-based domestic gas economy, a small move away from coal and a move towards the widespread, reliable availability of an affordable, safer energy source.
• Kramer is CEO of the SA Oil and Gas Alliance.
Peter Bruce is on long leave, but will be back.
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