International programmes of Department of Energy

Energy

13 February 2012
Chairperson: Mr S Njikelana (ANC)
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Meeting Summary

The Department of Energy briefed the Committee on its international programmes, with particular reference to the Southern Africa Power Pooling (SAPP) and the participation of South Africa. It was noted that the Department’s International Engagement Strategy was in alignment with the foreign policy as dictated by the Department of International Relations and Cooperation (DIRCO), which was premised on principles of National and Regional interest, South-South relations and North-South relations.

The presentation focused on the major tenets of the Department‘s international engagement in the oil, gas and electricity sectors. The implementation of the strategy was driven by issues of security of energy supply and resources, access to funding, climate change, skills and capacity building, diversity of supply, safety, access to technology and access to information. Specifics were given of each of these areas. The presentation then focused on South Africa’s role in Africa, and in the Southern African Development Community. An overview was given of the bilateral and multilateral relations pursued by the Department of Energy (DoE), with specific mention being made of the Memorandum of Understanding (MOU) between PetroSA and SINOPEC (Chinese State owned Petroleum and Petrochemical group) on 30 September 2011. This enabled the two companies to explore the possibility of working together on the Mthombo project, conducting exploration and production, while at the same time engaging in wholesale trading and distribution of petroleum products in South Africa. There was another MOU between PetroSA and Petroleos de Venezuela (PDVSA) for access to near producing and near producing in Venezuela. A number of other agreements were signed with other individual countries. In particular, these had the potential to generate 40 000 Mw of hydro power. Implementation strategies must now be drafted. The Department had also embarked on a number of initiatives, to promote trading between South Africa and Mozambique Gas Commission, South African and the Namibia Gas Commission to promote the development of gas assets. Agreements between Angola, PetroSA and Senegal to explore areas of cooperation in the oil and gas sectors were underway. Imports of crude oil from Angola and Nigeria had increased.

With regard to issues of climate change DoE’s policy was directed by the President’s
commitment to Green House Gas (GHG) reductions by 34% by 2020 and 42% by 2025, and had aligned its policies and international engagements to this. The various initiatives in which it participated were outlined. Pilot projects were under in Norway, United Kingdom and Australia. DoE was also assisting in the establishment of the South African Centre of Carbon Capture and Storage (SACCCS), and the Carbon Capture and Storage Atlas. It was developing a wind atlas. Other initiatives included the African Energy Ministers Conference (AEMC). In the nuclear field it had established relations with multilateral bodies that promoted the safe use of nuclear fuels and adhered to the principles of non-proliferation and bilateral engagements had been concluded with Algeria, Korea, Uganda and China.

Funding for international activities was covered by a
Declaration of Intent (DOI) on the South African Renewable Initiative with the Kingdom of Denmark, United Kingdom, Norway, Germany and the European Investment Bank, and the agreement also facilitated job creation technology transfer and localisation of investments. There was also US$20 billion investment between the Government and the People’s Republic of China (China Development Bank Corporation) on cooperation in the Energy sector

A summary was then made of the demand and supply situation within 12 countries in Africa, with the difference between installed and available supply explained. DoE predicted that in the near future due to the economic growth in several African countries challenges could be encountered in meeting these energy needs, which could also arrest economic development and the success of the region. A summary was given of the potentially viable SAPP Transmission Projects. An overview of the estimates of the Regional projects was outlined.

Members enquired about the implications of the United Nations sanctions on Iran on South Africa’s fuel supply and what measures had been put in place to increase shortage of supply in the event of a reduction in supply. In relation to the various SAPP initiatives Members asked questions on the status of the Mmamabula Project, delays in the Grand Inga Projects and the Zizabona Project. Members expressed concern at the delays in the finalisation of Power Investment Projects. Members were also concerned over terms and conditions of funding such as the US$20 billion agreement between Petro SA and the Chinese Development Bank and the Declaration of Intent (DOI) on the South African Renewable Initiative. They queried if the current crisis in the Eurozone could impact funding of these projects and South-South funding. Members highlighted the need for costing of the specific projects, and also emphasised the need to have in place the ISMO Bill and regional regulation. Members also asked questions of clarity on the progress made by the South African National Energy Development Institute (SANEDI) regarding the Grid Initiative, appliances used for energy efficiency and viability of the electric and gas car initiative. They questioned the meaning of various terms. They looked forward  to receiving invitations to the next workshops and conference held by the Department. Members also requested an update of the International Energy Strategy Document, more documentation on the Partnership for Energy deals and the number of MOUs signed to date, as well as a briefing on the  outcomes of the Energy Ministerial Conference. Further questions related to the challenges of financing, regulation and pricing of power trading, and some Members also noted that South Africa’s over dependence on external sources was problematic. They noted that no mention was made of the Regional Energy Strategy led by SADC to meet the demand and supply in the Continent. The Department conceded that implementation now needed to be done on the Master Plans and that it was necessary to hold high-level discussions to ensure that energy projects were prioritised in all partner countries.


International Programmes of the Department of Energy
Ms Neliswe Magubane, Director General, Department of Energy, apologised for the absence of the Minister, and noted that she would be unable to attend the entire meeting as she had to attend another meeting.

She noted that the International Engagement Strategy of the Department of Energy (DoE or the Department) was informed by principles of national interest, cooperation in developing and diversification of clean energy, and security of supply. Regionally the driving factors were distribution of energy supplies and power pools.

Ms Elizabeth Marabwa, Chief Director: International Coordination, Department of Energy, noted that DoE’s International Engagement Strategy was in alignment with the foreign policy as dictated by the Department of International Relations and Cooperation (DIRCO), which was premised on principles of National and Regional interest, South-South relations and North-South relations. The implementation of the strategy was driven by issues of security of energy supply and resources, access to funding, climate change, skills and capacity building, diversity of supply, safety, access to technology and access to information.

She noted that South Africa was mainly dependent on external sources, with 60% to 70% of oil supplies from the Middle East, while most of the gas came from Mozambique. DoE engagements with regard to security of supply and diversity of sources focused on access to producing and near-producing assets, first on the African continent and then elsewhere, while ensuring affordability and accessibility of the energy products. DoE had in this regard embarked on a number of initiatives such as the South Africa and Mozambique Gas Commission, which was aimed at promoting gas development and trading between the countries, and the South Africa and Namibia Gas Commission to promote the development of gas assets. Agreements between Angola, PetroSA and Senegal to explore areas of cooperation in the oil and gas industries were being concluded. There was also  a significant increase of crude oil from Angola and Nigeria.

The Department signed several Memoranda of Understanding (MOUs), such as one between PetroSA and SINOPEC (Chinese State owned Petroleum and Petrochemical group), on 30 September 2011. The MOU enabled the two companies to explore the possibility of working together on the Mthombo project, conducting exploration and production while at the same time engaging in wholesale trading and distribution of petroleum products in South Africa. Another MOU was between PetroSA and Petroleos de Venezuela (PDVSA) for access to near producing in Venezuela.

DoE also signed a number of MOUs with Egypt (2010), Ghana (2010), Algeria (2010), and Kingdom of Lesotho, focusing on Renewable Energy, and one with Democratic Republic of Congo (2011) for the Grand Inga Project, which had the potential of generating 40 000MW of hydro power. DoE must now draft implementation strategies.

DoE’s policy on climate change was directed by the President’s
commitment to greenhouse gas (GHG) reductions of 34% by 2020, and 42% by 2025.  Therefore, DoE had reviewed its policies and international engagements to enable alignment to this mandate. DoE participated in initiatives such as the International Partnership for Energy Efficiency Cooperation and the Carbon Sequestration Leadership Forum, in which energy Ministers endorsed Carbon Capture and Storage Technologies to combat climate change through the development of clean coal technologies. Pilot projects were under way in Norway, United Kingdom and Australia. DoE had also assisted in the establishment of the South African Centre of Carbon Capture and Storage (SACCCS). It had also, with the assistance of international funding from bilateral and multilateral organisations, assisted in the development of the Carbon Capture and Storage Atlas. Assistance from Denmark enabled DoE to develop a wind awareness campaign that could result in the development of a wind atlas and transfer of skills and technology in Africa.

DoE, in furtherance of the promotion of Clean Energy, had participated in initiatives such as the Clean Energy Ministerial Forum spear-headed by the United States (USA) in the Major Economies Forum. South Africa, as the only participating African country, was nominated the ambassador for Clean Energy in Africa. The Forum supported eleven initiatives such as the Multilateral Solar and Wind Working Group, the Global Superior Energy Performance Partnership (GSEP) that was aimed at reducing global energy use in industrial facilities, Energy Efficiency Initiative, Electric Vehicle Initiative, Carbon Capture use and Storage Action Group, Solar and LED Energy Access Programme, Clean Energy Education and Empowerment Women Initiative (C3E),Smart Grid initiatives, and the Super Efficient Appliance and Deployment Initiative (SEAD).

Other initiatives included the African Energy Ministers Conference (AEMC), which was attended by Ministers from 45 countries in preparation for COP 17. Ministers had outlined priority projects and made a conscious decision to support climate change initiatives through deployment of sustainable energy programmes.  In addition, there was emphasis on the need for funding, technology and skills transfer within the Energy sector.

With regard to Nuclear energy, DoE had established relations with multilateral bodies that promoted the safe use of nuclear energy and adhered to the principles of non-proliferation, such as the International Atomic Energy Agency (IEAE). In addition, several bilateral engagements had been conducted and agreements had been concluded with Algeria, Korea, Uganda and China.

Ms Marabwa detailed how DoE would access funding for international activities.  DoE had signed a
Declaration of Intent (DOI) on the South African Renewable Initiative with the Kingdom of Denmark, United Kingdom, Norway, Germany and the European Investment Bank. This DOI enabled the government to access soft loans from signatory countries and institutions to support deployment of renewable energy. It also facilitated job creation technology transfer and localisation of investments.

In addition, there was a US$20 billion investment between the South African government and the People’s Republic of China (China Development Bank Corporation) on cooperation in the Energy sector
. This contract allowed companies such as PetroSA to forge relations with experienced Chinese oil and gas companies in the upstream sector while also allowing the Chinese companies to participate in PetroSA’s infrastructure projects within the country. This agreement had also resulted in the initiation of an Energy forum, where officials and business could meet once a year to review implementation of the MOU. A number of private companies had also signed a number of business agreements with Chinese companies to invest in the energy sector in the country. These projects were being monitored to ensure that there was mutual benefit, alignment to the job creation initiatives, compliance with the Industrial Policy Action Plan (IPAP 2), localisation of investments, technology transfer and skills development.

With regard to capacity building, MOUs had been signed with the International Energy Agency (2011) and the International Atomic Energy Agency. Projects initiated in the Southern African Development Community (SADC) included the Energy Ministers’ Annual Meeting, which was aimed at developing a master plan for the Renewable Energy Strategy for SADC. Discussions at the meeting could also include deliberations over the alignment of regulatory policies to ensure regional trade and investment through the establishment of the Regional Electricity Regulatory Authority (REGA).

DoE also intended to conducted several capacity building workshops on energy, such as the clean development mechanisms on bio-fuels and food security.

Ms Marabwa then outlined the
demand and supply situation within 12 countries in Africa. The total installed capacity (mw) was listed at 56 188 mw while the available was 47 632 mw, so installed minus available was 5 769 mw. The peak for 2010 was listed as 43 722mw while the deficit was 550 mw. DoE predicted that in the near future, owing to the economic growth in several African countries, there might be challenges in meeting these energy needs, and if they were not addressed it could arrest economic development and the success of the region.

She also tabled a summary of the planned capacity versus the forecast of the Southern African Power Pool (SAPP) members. A critical call for capacity could be experienced by 2014 and therefore there was a need to build in adequate reserve margins. There was also the possibility of a crisis in regard to the forecasts in relation to energy planning, by 2016, and she said it would be imperative to implement the energy projects on time to avoid an energy crisis.

Ms Marabwa noted, in regard to the SADC Power Pooling, that there need to create an enabling environment through financing, regulation and pricing in long-term cross-border power trading. An overview of the regulatory decisions of cross border deals was then illustrated in a diagram (see attached presentation).

A summary was given of the potentially viable SAPP Transmission Projects. These included the
Transmission Backbone in Mozambique, HCB North Bank Mpanda Nkuwa Hydro Power Project in Mozambique. The Batoka Hydro project in Zambia and Zimbabwe, Kafue Gorge Lower in Zambia, Kariba South Extension in Zimbabwe were also listed. The Kudu Gas Power Project in Namibia, the Zambia – Tanzania – Kenya Interconnector, the Mozambique – Malawi Interconnector, the Namibia – Angola Interconnector, the DRC – Angola Interconnector, the ZIZABONA Interconnector, Central Transmission Corridor (CTC) in Zimbabwe, Kafue – Livingstone Transmission Upgrades were also mentioned.

An overview of the estimates of the Regional projects was given, listing the Kudu Gas Project (US$ 600 million), Mmamabuala(US$3 000 million), Kafue Lower (US$1.500 million) and Zizabona (US$385 million).

Ms Marabwa concluded her presentation by summarising that DoE had
initiated both multilateral and bilateral relations that focused on ensuring that South Africa had access to secure, affordable and accessible energy, access to funding, technology and skills transfers, promoted localisation investment, job creation and the embracing of the African continent and SADC region. Furthermore the relations promoted South – South Cooperation and North – South, in line with DIRCO policy.

Discussion
Mr K Moloto (ANC) asked about the implications of the United Nations sanctions on Iran.

Ms Thandeka Zungu, Chief Operating Officer, Department of Energy, replied that Members would soon be briefed on the outcomes of a Cabinet meeting in which the issue was being discussed by the Minister of Energy.

Mr Moloto asked about the current status of the Mmamabula Project, particularly considering the complex politics involved.

Ms Marabwa pointed out that the pace of project was determined by the Botswana Government and DoE had no influence over the progress.

Ms Zungu reiterated that these projects were a negotiated process and South Africa, because it had few energy resources, had to be patient and try to nurture relationships that could yield positive outcomes, and that MOUS would be drawn to implement the projects.

Mr Moloto mentioned that power investment projects took far too long to maintain investors’ interests and wondered what DoE was doing to resolve the challenge.

Ms Marabwa highlighted that these projects took so long because of their nature and the intricacies involved, such as absence of local skills and capacity to implement such projects. Some countries lacked finances to fund the projects. She agreed that there were various challenges in the tabling and implementation of projects. Nonetheless the Energy Ministers at the conference had prioritized these areas where the Continent required assistance.

Mr Moloto referred to the project between PetroSA and the Chinese company, asking about the terms and conditions of ownership.

Ms Marabwa replied that PetroSA was cognisant of its responsibility, the mandate, significance and strategic importance of the project to the country. In all assertions, it would, as an equity partner adhere to principles of national interest. DoE would be involved in the negotiations, acting as “gatekeepers” in ensuring that there was necessary compliance before execution.

Mr D Ross (DA) asked for the terms and conditions of the Chinese Bilateral Agreement amounting to US $20 billion, including an indication of the broader intention and designation of this loan.

Ms Marabwa replied that the loan was to be used in the energy sector for whatever project was commercially viable and bankable.

Mr E Lucas (IFP) commented that DoE should give the set deadlines for implementation of the projects and plans.

Mr Lucas referred to SAPP, and asked the costing of specific projects and South Africa’s contribution to each.

Mr H Schmidt (DA) reiterated that the presentation did not indicate the cost and economies of each of the initiatives listed.

Ms Marabwa replied that unless DoE had been involved in the feasibility studies it was not in a position to determine the individual costs involved in each project. It had to rely on figures provided by the partnering country.

Ms Zungu reiterated that costing could be done at a later stage.

Mr Schmidt mentioned that Petro SA had a poor track record in terms of oil exploration, as it had wasted R2 billion on explorations in Equatorial Guinea and Egypt. He noted, from his interactions with a private company, that the greatest profits occurred at the exploration site. In most cases the beneficiaries were foreign companies and investors on the stock market. He would be in favour of finding financial systems and initiatives that would involve and benefit African investors.

Ms Marabwa replied that PetroSA had gone through the exploration phase and identified that it was a high risk / high return sector. It was now placing more emphasis on near producing or producing assets.

Mr Schmidt commented, in regard to gas deposits in Tanzania, that the Japanese had already entered the market and therefore it was necessary for Government to be bold and move beyond the development of a regional plan and signing of MOUs towards implementation.

Mr Schmidt asked the reasons for delays in the Grand Inga Project in the Democratic Republic of Congo, also asking what measures DoE could put in place to overcome the challenges and make the project a reality.

Mr Ross commented on the need to have the ISMO Bill in place in order to include private sector involvement. At regional level, it was also imperative to have regulation for securing security of supply. South Africa was in a similar position to Germany, in that both were over-dependent on external energy supplies. He thought it was a problem for government to be investing extensively into external sources.

Mr S Radebe (ANC) asked for progress made by South African National Energy Development Institute (SANEDI), with regard to the Smart Grid initiative.

Ms Marabwa replied that SANEDI had a unit that was looking into the Smart Grid initiative. This was still at research and not promulgation phase, but she was certain that once funding was made available, more serious efforts could be made for its implementation.

The Chairperson noted that SANEDI could be called to the Committee to give an update and respond to questions regarding the Smart Grid initiative.

Mr Radebe asked about the appliances used for energy efficiency.

Ms Marabwa replied that the appliances were already on the market, but consumers had to be made aware of them.

Mr Radebe asked about the viability of the electric and gas cars initiatives, noting that an oversight visit had highlighted several shortcomings, including the short battery life in the electric car.

Ms Marabwa replied that these projects were still in the initial stages and would improve as the technology was improved. There was progress, and investment in battery technology, to ensure an increase in battery reliability to make it a more feasible option, if overnight charging could increase the time that cars could be driven.

Mr Radebe asked for clarification on the Declaration of Intent (DOI), what was meant by a soft loan, and the terms and conditions of these loans.

Ms Marabwa replied that these were loans, issued out by developed countries/ financial institutions willing to fund projects such as the Renewable Energy Projects, at interest rates that were not at the current money market rate. The funding was given under the condition that it should allow for transfer of technology and access by local energy investors.

The Chairperson noted that while the Department could respond to some of these questions, they were not directly related to international activities.

Mr J Selau (ANC) asked for plans put in place to overcome the challenges of financing, regulation and pricing of power trading in the SADC region.

Ms Marabwa replied that one strategy was Regional implementation of projects through SAPP, as the commercialisation of most of the projects required the presence of an anchor customer such as South Africa. This was essential for attracting investors. However, a major obstacle was the fact that the energy sector in most countries was in competition with other sectors, and the projects’ success would depend on how they had been prioritised in relation to issues in other sectors.

Mr Selau asked one consequence of electric cars might be an increase in the use of energy in the evenings as car batteries were charged.

Ms Marabwa replied that DoE could budget for it as there were different peak times for energy usage.  The technology of storing electricity was not well-developed, and electricity could be used at night to charge batteries. DoE, however, did not see that oil and gas propelled vehicles would be totally replaced, and rather that electric car technology could simply augment them. This technology would allow a country to eventually wean itself off a resources which could come to an end in future generations to come.

Mr Schmidt asked if, given the crisis in the Middle East, crude oil was being stored at Saldanha to hedge against supplies being were cut off or reduced.

Ms Zungu replied that Saldanha was operational and was storing an average of 10 million barrels of crude oil. Refined products were kept by individual companies for however long they decided, given the time periods in which these had to be used in order to maintain specifications. DoE was, however, in continuous discussions with private companies regarding their level of stocks in order to ensure sufficient stocks.

The Chairperson asked where the international group was located within DoE.

Ms Zungu replied that the international Department’s Chief Directorate was placed within the office of the Chief Operating Officer (COO).

The Chairperson asked what was meant by an anchor customer, and asked for an overview of all potential anchor customers for the gas resources in the continent.

Ms Zungu noted that currently SASOL was the major buyer of gas in South Africa. She added that an anchor customer was a confirmed, definite customer who gave confidence to the investors to develop in the infrastructure and gas assets.

The Chairperson asked for clarification on the terms “near producing and producing assets”. He asked why DoE had chosen to work with the Venezuela Government.

Ms Marabwa replied that near producing assets were identified definite reserves, so the requirement here was simply sinking the well. Sinking the well and preparing it for production took between five and ten years depending on the size. Producing of assets involved buying of equity in an already-producing well, also referred to as “farming out”. The agreement with the Venezuela Government was made because the government had been keen and forthcoming in supporting the initiative of sourcing near producing and producing assets.

The Chairperson asked about a wind-energy deal reported in a newspaper between a South African Investment Company, Lesotho, and a Chinese Investment Company.

Ms Marabwa replied that DoE was aware of the deal and was awaiting a formal approach from government on this.

The Chairperson asked for more documentation on the Partnership for Energy deals. 

The Chairperson asked about the number of MOUs signed to date.

Ms Zungu replied that the Minister had initiated an exercise to take note of all the MOUs from the 1960s to present date, highlighting the outcomes of each.

The Chairperson asked what “CCUS” was.

Ms Marabwa replied that it referred to Carbon Capture Use and Storage. The use element has been introduced by the Chinese, who were in the process of developing technology to use the captured carbon. This research was still in its preliminary stages and very expensive. South Africa could learn and copy these technologies at a later stage.

The Chairperson asked for clarification on the role of Switzerland in the presentation, as few details had been given.

Ms Marabwa replied that DoE had signed a MOU with Switzerland to assist in funding a project to measure and monitor energy verification of energy efficiency. This was essential in creating an auditing, measuring and verification system to measure energy efficiency pegged at international level.

The Chairperson asked what programmes were being implemented by the Clean Energy Ministerial Forum, and what was South Africa’s role as ambassador, and if there were any challenges.

Ms Marabwa replied that South Africa was  the only African country of the 24 participating countries, so what it learnt was shared with other African counterparts. Its role was also to ensure that the interests of African countries were taken into consideration at an international arena. For instance, DoE motivated that a wind and solar atlas be developed to include Africa. This could enable African countries to identify areas where wind turbines could be placed. DoE also motivated that pilot projects for certain initiatives be initiated in African countries. Another initiative that had benefited the Continent was the Clean Energy Solution Centre, an interactive policy centre that would assist individual countries in the drafting of legislature.

The Chairperson asked for more details around the Mexican Model of Appliance and the policies around it.

The Chairperson commented on the Energy Public Meeting to be held this month to debate if prospects existed for local manufacturing of energy technologies.

The Chairperson commented that the Minister of Energy was required to give a briefing on the outcomes of the Energy Ministerial Conference.

Ms Zungu replied that this had been noted and arrangements could be put in place to this effect.

The Chairperson asked for details on DoE’s relationship with international bodies concerned with nuclear energy.

Ms Marabwa replied DoE had a working relationship with bodies such as the African Commission on Nuclear Energy, led by South Africa. A conference was held in which the IAE assisted in teaching regulators from the DoE and the private sector on best practices in nuclear energy.

The Chairperson asked who was involved in the International Partnership for Renewable Energy.

Ms Marabwa replied that it was initiated by the G20 countries who saw it necessary to have the Energy Efficiency Accord. Countries signed to ensure that they harmonised their policies and regulations to ensure energy efficiency. South Africa had been approved, but there was a membership fee.

The Chairperson asked about the chances of continued funding from the European Investment Bank, given the financial crisis in the Euro zone. He wondered if there were funding prospects from South-South partners.

Ms Marabwa replied that while the Euro zone was going through a financial crisis, there was a growing trend, globally, to move away from over reliance on the service industry, to the transfer of technologies to new markets. The investment in Renewable Energy technologies was indirectly going to promote the deployment of their technology. DoE was confident that the funding was likely to be forthcoming. With regard to South-South relations, South Africa was the major contributor in terms of investments in Africa.

The Chairperson commented there should be harmonisation of legislation at regional level. While no Regional Parliament existed, these initiatives should be pushed through the Parliamentary Forum.

The Chairperson mentioned that DoE should give Members an invitation to attend the biofuels and food security workshop.

Ms Zungu replied that could be taken into consideration, as the Minister had declared March an energy month with a number of indabas taking place.

The Chairperson asked for the reasons and rationale why the Zizabona Project excluded South Africa, although the grid was supposed to be a region-wide grid.

Ms Marabwa replied that the intention was not to exclude South Africa, but link up the three countries (Botswana, Zambia and Namibia). A link already existed between South Africa and the individual countries, but they lacked a link between each other to increase connectivity.

The Chairperson commented that Regional Energy Integration was expected to be included in discussions on Regional Economic Integration being held by the Department of Economic Development.

The Chairperson asked for the progress made on the International Energy Strategy document, and when it was scheduled for presentation to the Committee.

Ms Zungu replied that the document had taken longer than anticipated, mainly because there had to be consultation with a variety of other stakeholders and departments. It should be finalised in the next couple of weeks.

Mr Moloto asked for clarification on the supply demand table.

Ms Marabwa noted that the installed capacity was the maximum capacity of the country, while the actual capacity represented what was produced. In most cases actual would be less than maximum, due to challenges such as maintenance issues and unplanned shut downs. Peak demand represented the highest demand during the year, which in most countries happened during winter. In the event that the peak demands exceeded actual capacity there would be black outs and load shedding.

Mr Moloto asked what Petro SA was doing to secure feedstock with Mozambique, given that it had less than five year stock.

The Chairperson asked for clarification on DoE’s relationship with multilateral organisations such as the UN.

Ms Marabwa replied that DoE had a strong relationship with the African Union (AU), participating in activities such as the Conference of the African Energy Ministers and the African Energy Partnership. In addition the Department was hosting the Africa/EU Conference in May 2012. In addition, DoE had a good working relationship with
United Nations Industrial Development Organization (UNIDO) that had resulted in the implementation of a variety of projects.

The Chairperson commented that the presentation lacked comment on the Regional Energy Strategy led by SADC to meet the demand and supply, on the African continent, of the projected growth and the harmonization of policy and legislations.

Ms Marabwa replied that the biggest challenge was that while Master Plans had been developed, such as the Hydro Carbons Strategy, Oil and Gas Strategy and Renewable Energy Strategy, implementation was lacking at the moment. She suggested that it would be necessary to hold discussions to ensure that other countries’ energy projects were prioritised. This was a political challenge that could not be driven by the Minister only, but also required the involvement of parliamentarians in the region.

Ms Zungu noted that some of the questions that had not been responded to could be addressed in future meetings.

The meeting was adjourned.



Meeting report

International Programmes of the Department of Energy
Ms Neliswe Magubane, Director General, Department of Energy, apologised for the absence of the Minister, and noted that she would be unable to attend the entire meeting as she had to attend another meeting.

She noted that the International Engagement Strategy of the Department of Energy (DoE or the Department) was informed by principles of national interest, cooperation in developing and diversification of clean energy, and security of supply. Regionally the driving factors were distribution of energy supplies and power pools.

Ms Elizabeth Marabwa, Chief Director: International Coordination, Department of Energy, noted that DoE’s International Engagement Strategy was in alignment with the foreign policy as dictated by the Department of International Relations and Cooperation (DIRCO), which was premised on principles of National and Regional interest, South-South relations and North-South relations. The implementation of the strategy was driven by issues of security of energy supply and resources, access to funding, climate change, skills and capacity building, diversity of supply, safety, access to technology and access to information.

She noted that South Africa was mainly dependent on external sources, with 60% to 70% of oil supplies from the Middle East, while most of the gas came from Mozambique. DoE engagements with regard to security of supply and diversity of sources focused on access to producing and near-producing assets, first on the African continent and then elsewhere, while ensuring affordability and accessibility of the energy products. DoE had in this regard embarked on a number of initiatives such as the South Africa and Mozambique Gas Commission, which was aimed at promoting gas development and trading between the countries, and the South Africa and Namibia Gas Commission to promote the development of gas assets. Agreements between Angola, PetroSA and Senegal to explore areas of cooperation in the oil and gas industries were being concluded. There was also  a significant increase of crude oil from Angola and Nigeria.

The Department signed several Memoranda of Understanding (MOUs), such as one between PetroSA and SINOPEC (Chinese State owned Petroleum and Petrochemical group), on 30 September 2011. The MOU enabled the two companies to explore the possibility of working together on the Mthombo project, conducting exploration and production while at the same time engaging in wholesale trading and distribution of petroleum products in South Africa. Another MOU was between PetroSA and Petroleos de Venezuela (PDVSA) for access to near producing in Venezuela.

DoE also signed a number of MOUs with Egypt (2010), Ghana (2010), Algeria (2010), and Kingdom of Lesotho, focusing on Renewable Energy, and one with Democratic Republic of Congo (2011) for the Grand Inga Project, which had the potential of generating 40 000MW of hydro power. DoE must now draft implementation strategies.

DoE’s policy on climate change was directed by the President’s
commitment to greenhouse gas (GHG) reductions of 34% by 2020, and 42% by 2025.  Therefore, DoE had reviewed its policies and international engagements to enable alignment to this mandate. DoE participated in initiatives such as the International Partnership for Energy Efficiency Cooperation and the Carbon Sequestration Leadership Forum, in which energy Ministers endorsed Carbon Capture and Storage Technologies to combat climate change through the development of clean coal technologies. Pilot projects were under way in Norway, United Kingdom and Australia. DoE had also assisted in the establishment of the South African Centre of Carbon Capture and Storage (SACCCS). It had also, with the assistance of international funding from bilateral and multilateral organisations, assisted in the development of the Carbon Capture and Storage Atlas. Assistance from Denmark enabled DoE to develop a wind awareness campaign that could result in the development of a wind atlas and transfer of skills and technology in Africa.

DoE, in furtherance of the promotion of Clean Energy, had participated in initiatives such as the Clean Energy Ministerial Forum spear-headed by the United States (USA) in the Major Economies Forum. South Africa, as the only participating African country, was nominated the ambassador for Clean Energy in Africa. The Forum supported eleven initiatives such as the Multilateral Solar and Wind Working Group, the Global Superior Energy Performance Partnership (GSEP) that was aimed at reducing global energy use in industrial facilities, Energy Efficiency Initiative, Electric Vehicle Initiative, Carbon Capture use and Storage Action Group, Solar and LED Energy Access Programme, Clean Energy Education and Empowerment Women Initiative (C3E),Smart Grid initiatives, and the Super Efficient Appliance and Deployment Initiative (SEAD).

Other initiatives included the African Energy Ministers Conference (AEMC), which was attended by Ministers from 45 countries in preparation for COP 17. Ministers had outlined priority projects and made a conscious decision to support climate change initiatives through deployment of sustainable energy programmes.  In addition, there was emphasis on the need for funding, technology and skills transfer within the Energy sector.

With regard to Nuclear energy, DoE had established relations with multilateral bodies that promoted the safe use of nuclear energy and adhered to the principles of non-proliferation, such as the International Atomic Energy Agency (IEAE). In addition, several bilateral engagements had been conducted and agreements had been concluded with Algeria, Korea, Uganda and China.

Ms Marabwa detailed how DoE would access funding for international activities.  DoE had signed a
Declaration of Intent (DOI) on the South African Renewable Initiative with the Kingdom of Denmark, United Kingdom, Norway, Germany and the European Investment Bank. This DOI enabled the government to access soft loans from signatory countries and institutions to support deployment of renewable energy. It also facilitated job creation technology transfer and localisation of investments.

In addition, there was a US$20 billion investment between the South African government and the People’s Republic of China (China Development Bank Corporation) on cooperation in the Energy sector
. This contract allowed companies such as PetroSA to forge relations with experienced Chinese oil and gas companies in the upstream sector while also allowing the Chinese companies to participate in PetroSA’s infrastructure projects within the country. This agreement had also resulted in the initiation of an Energy forum, where officials and business could meet once a year to review implementation of the MOU. A number of private companies had also signed a number of business agreements with Chinese companies to invest in the energy sector in the country. These projects were being monitored to ensure that there was mutual benefit, alignment to the job creation initiatives, compliance with the Industrial Policy Action Plan (IPAP 2), localisation of investments, technology transfer and skills development.

With regard to capacity building, MOUs had been signed with the International Energy Agency (2011) and the International Atomic Energy Agency. Projects initiated in the Southern African Development Community (SADC) included the Energy Ministers’ Annual Meeting, which was aimed at developing a master plan for the Renewable Energy Strategy for SADC. Discussions at the meeting could also include deliberations over the alignment of regulatory policies to ensure regional trade and investment through the establishment of the Regional Electricity Regulatory Authority (REGA).

DoE also intended to conducted several capacity building workshops on energy, such as the clean development mechanisms on bio-fuels and food security.

Ms Marabwa then outlined the
demand and supply situation within 12 countries in Africa. The total installed capacity (mw) was listed at 56 188 mw while the available was 47 632 mw, so installed minus available was 5 769 mw. The peak for 2010 was listed as 43 722mw while the deficit was 550 mw. DoE predicted that in the near future, owing to the economic growth in several African countries, there might be challenges in meeting these energy needs, and if they were not addressed it could arrest economic development and the success of the region.

She also tabled a summary of the planned capacity versus the forecast of the Southern African Power Pool (SAPP) members. A critical call for capacity could be experienced by 2014 and therefore there was a need to build in adequate reserve margins. There was also the possibility of a crisis in regard to the forecasts in relation to energy planning, by 2016, and she said it would be imperative to implement the energy projects on time to avoid an energy crisis.

Ms Marabwa noted, in regard to the SADC Power Pooling, that there need to create an enabling environment through financing, regulation and pricing in long-term cross-border power trading. An overview of the regulatory decisions of cross border deals was then illustrated in a diagram (see attached presentation).

A summary was given of the potentially viable SAPP Transmission Projects. These included the
Transmission Backbone in Mozambique, HCB North Bank Mpanda Nkuwa Hydro Power Project in Mozambique. The Batoka Hydro project in Zambia and Zimbabwe, Kafue Gorge Lower in Zambia, Kariba South Extension in Zimbabwe were also listed. The Kudu Gas Power Project in Namibia, the Zambia – Tanzania – Kenya Interconnector, the Mozambique – Malawi Interconnector, the Namibia – Angola Interconnector, the DRC – Angola Interconnector, the ZIZABONA Interconnector, Central Transmission Corridor (CTC) in Zimbabwe, Kafue – Livingstone Transmission Upgrades were also mentioned.

An overview of the estimates of the Regional projects was given, listing the Kudu Gas Project (US$ 600 million), Mmamabuala(US$3 000 million), Kafue Lower (US$1.500 million) and Zizabona (US$385 million).

Ms Marabwa concluded her presentation by summarising that DoE had
initiated both multilateral and bilateral relations that focused on ensuring that South Africa had access to secure, affordable and accessible energy, access to funding, technology and skills transfers, promoted localisation investment, job creation and the embracing of the African continent and SADC region. Furthermore the relations promoted South – South Cooperation and North – South, in line with DIRCO policy.

Discussion
Mr K Moloto (ANC) asked about the implications of the United Nations sanctions on Iran.

Ms Thandeka Zungu, Chief Operating Officer, Department of Energy, replied that Members would soon be briefed on the outcomes of a Cabinet meeting in which the issue was being discussed by the Minister of Energy.

Mr Moloto asked about the current status of the Mmamabula Project, particularly considering the complex politics involved.

Ms Marabwa pointed out that the pace of project was determined by the Botswana Government and DoE had no influence over the progress.

Ms Zungu reiterated that these projects were a negotiated process and South Africa, because it had few energy resources, had to be patient and try to nurture relationships that could yield positive outcomes, and that MOUS would be drawn to implement the projects.

Mr Moloto mentioned that power investment projects took far too long to maintain investors’ interests and wondered what DoE was doing to resolve the challenge.

Ms Marabwa highlighted that these projects took so long because of their nature and the intricacies involved, such as absence of local skills and capacity to implement such projects. Some countries lacked finances to fund the projects. She agreed that there were various challenges in the tabling and implementation of projects. Nonetheless the Energy Ministers at the conference had prioritized these areas where the Continent required assistance.

Mr Moloto referred to the project between PetroSA and the Chinese company, asking about the terms and conditions of ownership.

Ms Marabwa replied that PetroSA was cognisant of its responsibility, the mandate, significance and strategic importance of the project to the country. In all assertions, it would, as an equity partner adhere to principles of national interest. DoE would be involved in the negotiations, acting as “gatekeepers” in ensuring that there was necessary compliance before execution.

Mr D Ross (DA) asked for the terms and conditions of the Chinese Bilateral Agreement amounting to US $20 billion, including an indication of the broader intention and designation of this loan.

Ms Marabwa replied that the loan was to be used in the energy sector for whatever project was commercially viable and bankable.

Mr E Lucas (IFP) commented that DoE should give the set deadlines for implementation of the projects and plans.

Mr Lucas referred to SAPP, and asked the costing of specific projects and South Africa’s contribution to each.

Mr H Schmidt (DA) reiterated that the presentation did not indicate the cost and economies of each of the initiatives listed.

Ms Marabwa replied that unless DoE had been involved in the feasibility studies it was not in a position to determine the individual costs involved in each project. It had to rely on figures provided by the partnering country.

Ms Zungu reiterated that costing could be done at a later stage.

Mr Schmidt mentioned that Petro SA had a poor track record in terms of oil exploration, as it had wasted R2 billion on explorations in Equatorial Guinea and Egypt. He noted, from his interactions with a private company, that the greatest profits occurred at the exploration site. In most cases the beneficiaries were foreign companies and investors on the stock market. He would be in favour of finding financial systems and initiatives that would involve and benefit African investors.

Ms Marabwa replied that PetroSA had gone through the exploration phase and identified that it was a high risk / high return sector. It was now placing more emphasis on near producing or producing assets.

Mr Schmidt commented, in regard to gas deposits in Tanzania, that the Japanese had already entered the market and therefore it was necessary for Government to be bold and move beyond the development of a regional plan and signing of MOUs towards implementation.

Mr Schmidt asked the reasons for delays in the Grand Inga Project in the Democratic Republic of Congo, also asking what measures DoE could put in place to overcome the challenges and make the project a reality.

Mr Ross commented on the need to have the ISMO Bill in place in order to include private sector involvement. At regional level, it was also imperative to have regulation for securing security of supply. South Africa was in a similar position to Germany, in that both were over-dependent on external energy supplies. He thought it was a problem for government to be investing extensively into external sources.

Mr S Radebe (ANC) asked for progress made by South African National Energy Development Institute (SANEDI), with regard to the Smart Grid initiative.

Ms Marabwa replied that SANEDI had a unit that was looking into the Smart Grid initiative. This was still at research and not promulgation phase, but she was certain that once funding was made available, more serious efforts could be made for its implementation.

The Chairperson noted that SANEDI could be called to the Committee to give an update and respond to questions regarding the Smart Grid initiative.

Mr Radebe asked about the appliances used for energy efficiency.

Ms Marabwa replied that the appliances were already on the market, but consumers had to be made aware of them.

Mr Radebe asked about the viability of the electric and gas cars initiatives, noting that an oversight visit had highlighted several shortcomings, including the short battery life in the electric car.

Ms Marabwa replied that these projects were still in the initial stages and would improve as the technology was improved. There was progress, and investment in battery technology, to ensure an increase in battery reliability to make it a more feasible option, if overnight charging could increase the time that cars could be driven.

Mr Radebe asked for clarification on the Declaration of Intent (DOI), what was meant by a soft loan, and the terms and conditions of these loans.

Ms Marabwa replied that these were loans, issued out by developed countries/ financial institutions willing to fund projects such as the Renewable Energy Projects, at interest rates that were not at the current money market rate. The funding was given under the condition that it should allow for transfer of technology and access by local energy investors.

The Chairperson noted that while the Department could respond to some of these questions, they were not directly related to international activities.

Mr J Selau (ANC) asked for plans put in place to overcome the challenges of financing, regulation and pricing of power trading in the SADC region.

Ms Marabwa replied that one strategy was Regional implementation of projects through SAPP, as the commercialisation of most of the projects required the presence of an anchor customer such as South Africa. This was essential for attracting investors. However, a major obstacle was the fact that the energy sector in most countries was in competition with other sectors, and the projects’ success would depend on how they had been prioritised in relation to issues in other sectors.

Mr Selau asked one consequence of electric cars might be an increase in the use of energy in the evenings as car batteries were charged.

Ms Marabwa replied that DoE could budget for it as there were different peak times for energy usage.  The technology of storing electricity was not well-developed, and electricity could be used at night to charge batteries. DoE, however, did not see that oil and gas propelled vehicles would be totally replaced, and rather that electric car technology could simply augment them. This technology would allow a country to eventually wean itself off a resources which could come to an end in future generations to come.

Mr Schmidt asked if, given the crisis in the Middle East, crude oil was being stored at Saldanha to hedge against supplies being were cut off or reduced.

Ms Zungu replied that Saldanha was operational and was storing an average of 10 million barrels of crude oil. Refined products were kept by individual companies for however long they decided, given the time periods in which these had to be used in order to maintain specifications. DoE was, however, in continuous discussions with private companies regarding their level of stocks in order to ensure sufficient stocks.

The Chairperson asked where the international group was located within DoE.

Ms Zungu replied that the international Department’s Chief Directorate was placed within the office of the Chief Operating Officer (COO).

The Chairperson asked what was meant by an anchor customer, and asked for an overview of all potential anchor customers for the gas resources in the continent.

Ms Zungu noted that currently SASOL was the major buyer of gas in South Africa. She added that an anchor customer was a confirmed, definite customer who gave confidence to the investors to develop in the infrastructure and gas assets.

The Chairperson asked for clarification on the terms “near producing and producing assets”. He asked why DoE had chosen to work with the Venezuela Government.

Ms Marabwa replied that near producing assets were identified definite reserves, so the requirement here was simply sinking the well. Sinking the well and preparing it for production took between five and ten years depending on the size. Producing of assets involved buying of equity in an already-producing well, also referred to as “farming out”. The agreement with the Venezuela Government was made because the government had been keen and forthcoming in supporting the initiative of sourcing near producing and producing assets.

The Chairperson asked about a wind-energy deal reported in a newspaper between a South African Investment Company, Lesotho, and a Chinese Investment Company.

Ms Marabwa replied that DoE was aware of the deal and was awaiting a formal approach from government on this.

The Chairperson asked for more documentation on the Partnership for Energy deals. 

The Chairperson asked about the number of MOUs signed to date.

Ms Zungu replied that the Minister had initiated an exercise to take note of all the MOUs from the 1960s to present date, highlighting the outcomes of each.

The Chairperson asked what “CCUS” was.

Ms Marabwa replied that it referred to Carbon Capture Use and Storage. The use element has been introduced by the Chinese, who were in the process of developing technology to use the captured carbon. This research was still in its preliminary stages and very expensive. South Africa could learn and copy these technologies at a later stage.

The Chairperson asked for clarification on the role of Switzerland in the presentation, as few details had been given.

Ms Marabwa replied that DoE had signed a MOU with Switzerland to assist in funding a project to measure and monitor energy verification of energy efficiency. This was essential in creating an auditing, measuring and verification system to measure energy efficiency pegged at international level.

The Chairperson asked what programmes were being implemented by the Clean Energy Ministerial Forum, and what was South Africa’s role as ambassador, and if there were any challenges.

Ms Marabwa replied that South Africa was  the only African country of the 24 participating countries, so what it learnt was shared with other African counterparts. Its role was also to ensure that the interests of African countries were taken into consideration at an international arena. For instance, DoE motivated that a wind and solar atlas be developed to include Africa. This could enable African countries to identify areas where wind turbines could be placed. DoE also motivated that pilot projects for certain initiatives be initiated in African countries. Another initiative that had benefited the Continent was the Clean Energy Solution Centre, an interactive policy centre that would assist individual countries in the drafting of legislature.

The Chairperson asked for more details around the Mexican Model of Appliance and the policies around it.

The Chairperson commented on the Energy Public Meeting to be held this month to debate if prospects existed for local manufacturing of energy technologies.

The Chairperson commented that the Minister of Energy was required to give a briefing on the outcomes of the Energy Ministerial Conference.

Ms Zungu replied that this had been noted and arrangements could be put in place to this effect.

The Chairperson asked for details on DoE’s relationship with international bodies concerned with nuclear energy.

Ms Marabwa replied DoE had a working relationship with bodies such as the African Commission on Nuclear Energy, led by South Africa. A conference was held in which the IAE assisted in teaching regulators from the DoE and the private sector on best practices in nuclear energy.

The Chairperson asked who was involved in the International Partnership for Renewable Energy.

Ms Marabwa replied that it was initiated by the G20 countries who saw it necessary to have the Energy Efficiency Accord. Countries signed to ensure that they harmonised their policies and regulations to ensure energy efficiency. South Africa had been approved, but there was a membership fee.

The Chairperson asked about the chances of continued funding from the European Investment Bank, given the financial crisis in the Euro zone. He wondered if there were funding prospects from South-South partners.

Ms Marabwa replied that while the Euro zone was going through a financial crisis, there was a growing trend, globally, to move away from over reliance on the service industry, to the transfer of technologies to new markets. The investment in Renewable Energy technologies was indirectly going to promote the deployment of their technology. DoE was confident that the funding was likely to be forthcoming. With regard to South-South relations, South Africa was the major contributor in terms of investments in Africa.

The Chairperson commented there should be harmonisation of legislation at regional level. While no Regional Parliament existed, these initiatives should be pushed through the Parliamentary Forum.

The Chairperson mentioned that DoE should give Members an invitation to attend the biofuels and food security workshop.

Ms Zungu replied that could be taken into consideration, as the Minister had declared March an energy month with a number of indabas taking place.

The Chairperson asked for the reasons and rationale why the Zizabona Project excluded South Africa, although the grid was supposed to be a region-wide grid.

Ms Marabwa replied that the intention was not to exclude South Africa, but link up the three countries (Botswana, Zambia and Namibia). A link already existed between South Africa and the individual countries, but they lacked a link between each other to increase connectivity.

The Chairperson commented that Regional Energy Integration was expected to be included in discussions on Regional Economic Integration being held by the Department of Economic Development.

The Chairperson asked for the progress made on the International Energy Strategy document, and when it was scheduled for presentation to the Committee.

Ms Zungu replied that the document had taken longer than anticipated, mainly because there had to be consultation with a variety of other stakeholders and departments. It should be finalised in the next couple of weeks.

Mr Moloto asked for clarification on the supply demand table.

Ms Marabwa noted that the installed capacity was the maximum capacity of the country, while the actual capacity represented what was produced. In most cases actual would be less than maximum, due to challenges such as maintenance issues and unplanned shut downs. Peak demand represented the highest demand during the year, which in most countries happened during winter. In the event that the peak demands exceeded actual capacity there would be black outs and load shedding.

Mr Moloto asked what Petro SA was doing to secure feedstock with Mozambique, given that it had less than five year stock.

The Chairperson asked for clarification on DoE’s relationship with multilateral organisations such as the UN.

Ms Marabwa replied that DoE had a strong relationship with the African Union (AU), participating in activities such as the Conference of the African Energy Ministers and the African Energy Partnership. In addition the Department was hosting the Africa/EU Conference in May 2012. In addition, DoE had a good working relationship with
United Nations Industrial Development Organization (UNIDO) that had resulted in the implementation of a variety of projects.

The Chairperson commented that the presentation lacked comment on the Regional Energy Strategy led by SADC to meet the demand and supply, on the African continent, of the projected growth and the harmonization of policy and legislations.

Ms Marabwa replied that the biggest challenge was that while Master Plans had been developed, such as the Hydro Carbons Strategy, Oil and Gas Strategy and Renewable Energy Strategy, implementation was lacking at the moment. She suggested that it would be necessary to hold discussions to ensure that other countries’ energy projects were prioritised. This was a political challenge that could not be driven by the Minister only, but also required the involvement of parliamentarians in the region.

Ms Zungu noted that some of the questions that had not been responded to could be addressed in future meetings.

The meeting was adjourned.



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