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Projects and Energy Weekly Snippets

2 March 2015

WEC Africa vice-chair calls for energy development for Africans, by Africans

Africa has the potential to be one of the biggest providers of energy in the world, but was still seen as a "good for nothing" continent, particularly with regard to US investment, World Energy Council (WEC) Africa vice-chairperson Bonang Mohale said on 11 February. Addressing delegates at the Africa Energy Indaba in Sandton, he emphasised the green energy potential held by the entire continent and by South Africa, in particular.

He pointed out that there was a dire need for energy development in Africa, as half of the 1.4 billion people in the world who did not have access to electricity lived on the continent. However, he said this development should be placed in the hands of the locals. "Africa must be the most niche-marketed and under-marketed continent in the world. You wonder why we find it so easy not to use…skills that are here, when we risk our lives to get these commodities, [which are exported immediately]," he says.

Mohale said there was a need for transformation in the local energy sector, as "our culture is too Eurocentric". He hoped that people coming to Ethiopia in 2016 for the World Energy Congress could help us think through these dilemmas. He also noted that there was significant potential in the oil and gas sector to contribute to the local energy sector.

Engineering News, 19 February 2015  
 
IPP office to issue gas RFI in March, aims to release tender before year-end

The South African government's Independent Power Producer (IPP) Office will release a request for information (RFI) in March for possible domestic gas-to-power projects, as a precursor to a possible 3 000 MW tender that should arise before year-end. IPP Office head Karen Breytenbach indicated that the RFI would be used to inform a future request for proposals (RFP), which could be released into the market during the third quarter of the year.

Despite the IPP Office having been already widely lauded for its role in procuring nearly 4 000 MW of renewable energy through three competitive bidding rounds, Breytenbach acknowledged that the gas IPP programme included the additional dilemma of how and where to source gas, with SA having limited domestic production capacity at present and inadequate gas-transportation infrastructure.

The expectation was that any gas-to-power programme would have to be premised on the importation of liquefied natural gas (LNG). However, this would require the development of an import terminal or terminals, as well as pipelines to link IPPs with their primary-energy source.
The Eskom war room, which is being overseen by Deputy President Cyril Ramaphosa, also viewed the development of a gas-to-power sector as urgent and discussions on stimulating the sector, initially through imports, were reportedly progressing within the forum.
"The National Treasury and the DoE believe gas should play a role in the electricity mix. There will be an IPP procurement programme and we will anchor the gas imports with the IPP programme. From that anchor, we believe gas will then enter the market and will then start forming part of industrial development," Breytenbach outlined.  

Engineering News, 20 February 2015

Coal, rooftop-solar expansions flagged in Makhura's six-point energy-security plan

Gauteng Premier David Makhura has outlined a range of initiatives to bolster power supply across South Africa's wealthiest province, including a plan to increase municipal coal-fired power generation by 1 200 MW and to use provincial government buildings to install up to 500 MW of rooftop solar capacity.

Six interventions to broaden the Gauteng City Region's energy mix were announced, including working with municipalities to add 1 200 MW of additional coal-fired generation by increasing capacity at the Rooiwal and Pretoria West power stations in Tshwane and the Kelvin power station, east of Johannesburg. The Kelvin power station was currently in the process of being sold by Investec and Nedbank, but it was not yet clear whether the new owner would be willing to raise output from the plant.

The other five initiatives included installing rooftop solar panels on the eight million square meters of rooftop space across provincial government buildings, which could be sufficient to generate between 300 MW and 500 MW of solar energy, implementing a programme to retrofit coal-fired boilers to natural gas, deploying tri-generation plants at the six provincial hospitals, harnessing biogas waste to produce energy, and installing energy efficient lighting across provincial government facilities.

Makhura said the province was also hoping to attract green-energy investors, revealing that it was working with the University of Johannesburg and the private sector to build a solar-panel manufacturing plant in the province, a ZAR7 billion project that is estimated to supply 500 MW of solar energy and create more than 15 000 direct and indirect jobs.

Engineering News, 23 February 2015

More than 70 bids received for fourth renewables bid window

Energy Minister Tina Joemat- Pettersson confirmed on 24 February that 77 bids were received by the 18 August 2014 submission deadline for the fourth bid window under the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) and that, with the evaluation process complete, an announcement of the preferred bidders was "imminent".

The Minister indicated that the implementation, power purchase and direct agreements should be signed within six months from the preferred bidder announcement date, with the projects reaching financial close within 300 days of the signing of the agreements.
Meanwhile, the Economic Sectors, Employment and Infrastructure Development Cluster of Ministers also reported that the process of renewing existing cogeneration contracts would be concluded in February and that negotiations for additional cogeneration capacity would be finalised during the first half of the year. 

The Ministers also announced that a "fair, transparent and competitive procurement process to select a strategic partner or partners to undertake the nuclear build programme" would proceed during the coming financial year. Inter-governmental agreements had already been concluded with five countries including the US, South Korea, Russia, France and China. Joemat-Pettersson reiterated that the nuclear procurement model had not yet been determined, but that the department is currently engaged in the pre-procurement phase including investigating the various procurement models that will be submitted for approval by Cabinet.

Engineering News, 24 February 2015 
 
Mthombo refinery not on hold, says SFF boss

The government's planned oil refinery in the Eastern Cape, Project Mthombo, is certainly not on hold, in fact discussions within the Department of Energy have intensified, Strategic Fuel Fund Association (SFF) CEO Bheki Gila said on 26 February. The refinery was one of a number of factors being considered to expand SA's energy capacity and security, he told the Africa Oil and Gas Legal Summit in Sandton.

Project Mthombo, a 400 000 barrels a day refinery to be built at Coega, has been under discussion for years and was originally scheduled for commissioning by last year. A price tag of $9bn was mentioned four years ago.

Special advisor to the energy minister, the SFF and the Central Energy Fund, SFF compliance officer Maria Kalabakis said there were huge opportunities for SA in its shale gas possibilities, which were estimated to be the eighth-largest in the world. But the country would need a robust regulatory framework to balance the opportunities with the risks. Draft regulations had been drawn up in line with international standards but had not yet been promulgated.

He continued that the regulation of shale gas in most countries was a combination of "command and control" and permitting. Command and control on its own was highly prescriptive, but requiring operators to secure permits for different activities was costly, allowed inside discretion and lacked transparency. Rather, the activities that should be regulated included the selection of sites, particularly ensuring they were not close to schools or water sources, the spacing between wells, how wells were lined with concrete to prevent leakage of fracking fluids, and the composition of the fluids to limit the use of toxic chemicals. There also needed to be standards on sourcing, storing or disposing of waste water.

Business Day, 27 February 2015 

The above reflects a summary of certain news articles published during the preceding week. It is not an expression of opinion in respect of each matter, nor may it be considered as a disclosure of advice by any employee of Hogan Lovells.

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