Natural Gas : briefing

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Mineral Resources and Energy

19 April 2000
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Meeting report

19 April 2000


Stakeholder Workshops on the Introduction of Natural Gas in the South African Economy:
Workshop One: The Gas Value Chain, Markets, and Necessary Frameworks (February 29, 2000)
Workshop Two: Gas versus Electricity - Leveling the Playing Field (March 14, 2000
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Report-back on the two workshops
Dr. Tony Surridge from the Department of Minerals and Energy began the presentation with a summary of the two stakeholder workshops that have been held so far.

The primary energy supply in South Africa is coal (75%), with gas accounting for only 1.6% of the current supply. The major sources natural gas are from neighbouring countries, but there has been a recent find in Offshore Western Waters, called Forrest, which is similar in size to the Kudu fields in Namibia, but about 200km closer to Cape Town.

Gas Policy, as spelled out in the White Paper, calls for a diversification of energy supply and provision of gas as soon as possible. There are a number of ways in which the South African market for gas could grow. These include increased use in SASOL factories, penetration of industrial and commercial markets (e.g. for metal manufacturing, ceramics and glass etc.), and gas for power generation.

Gas-fired power generation is potentially attractive, particularly in the Western Cape and on the KwaZulu-Natal Coast. It is more flexible than coal-fired generation, and there would be improved quality and reliability, and also environmental benefits. However, the costs of coal and electricity are lower. Other barriers to development are limited reserves of indigenous gas, long distances between sources and markets, and the fact that there is no demand for space heating due to South Africa's mild climate. Although gas is environmentally more benign than coal, there are less emissions of smoke and dioxides. Environmental issues are not the main driver here, nor are environmental frameworks sufficiently developed.

Although there is a future possibility of selling the unused quotas for carbon emissions to developed countries through the Kyoto Protocol, this protocol has not yet been ratified. In fact, not one developed country has signed it at this stage. The 6th Conference of Parties is scheduled for later this year, and more details on how the Protocol will be implemented will be available after that. In the meantime, the Athlone Power Station is investigating the possibility of changing over from coal to gas and trading the decrease in carbon emissions in this context.

The tasks that lie ahead include clarifying the public sector role in promoting and developing gas transmission piplelines, and creating regulatory certainty for private investors.


Gas Bill
The purpose of the Bill is to promote the orderly development of the piped gas industry, to establish a national regulatory framework, and to establish a National Gas Regulator as custodian and enforcer of this framework. The Bill covers only the transmission, storage and distribution of piped gas, not cylinders or canisters, and it excludes production and reticulation. The objectives are to promote the efficient, sustainable, and orderly development and operation of the downstream gas industry. It should facilitate investment and promote competitiveness, while ensuring safety, efficiency and environmental responsibility.

Although the Bill was scheduled to be released for public comment by 21 April 2000, the Minister would like the Bill to go to the Cabinet first. It should be released for the last round of public comment within a few weeks, and it is anticipated that it will be back in Cabinet in the third quarter.


South Africa's Cross-Border Trade Agreements
The Draft Agreement with Mozambique has been completed and approved by the Mozambique Council of Ministers. Approval is still in process in South Africa. A Draft Agreement with Namibia is still in negotiation.

Access to gas pipelines
Dr. Surridge elaborated on the issue of 3rd Party Access to gas pipelines. In order to promote competitive markets, the White Paper states that transmission lines must give allow third parties access to any spare capacity. This must be advertised before the pipeline is built, and third parties may change both the size and the routing. SASOL has asked that the pipeline be closed to third parties for 15 years, in order for it to develop a market. Although the White Paper does allow for a phasing in period, it is generally felt that 15 years goes beyond a phasing in period. No decision on this has been taken yet.


On a different topic, Mr. Nash raised a concern about why the government has not been using the funds made available by the Memorandum of Understanding (MOU) with Holland. The Chair requested Mr. Nash to prepare a presentation to the Portfolio Committee on this topic, and requested a written reply from Dr. Surridge.


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