Cape Town - AS Eskom struggles to supply the country with power, President Cyril Ramaphosa was in Washington, cap in hand, negotiating for more money to wean the utility off its dysfunctional coal power plants.
Ramaphosa and US President Joe Biden discussed a number of issues on Friday including the country’s energy crisis, investments and the war between Ukraine and Russia. South Africa has, so far, managed to resist joining Washington’s campaign against Moscow for the war in Ukraine.
The struggling state utility implemented extensive power outages and is scheduled to do so again this week, as Eskom battles its worst period of power cuts since it started more than a decade ago.
Following the meeting, Biden announced $45 million (R792 billion) in funding for a $8.5bn multinational venture aimed at accelerating the phasing out of coal-fired power generation in South Africa.
Yesterday, the presidency said both leaders agreed that South Africa required more funding to achieve an effective transition from fossil fuels to clean energy.
“The investment plan for the transition partnership between South Africa and four Western countries and the European Union is expected to be completed at the UN Climate Change Conference (COP27) in November in Egypt,” read the presidency’s statement.
The announcement comes as Eskom is seeking an average power tariff increase of just more than 32% for the financial year that starts on April 1, 2023.
Energy regulator Nersa has said it intends to announce its decision in November. The new request means electricity users, already grappling with a cost of living crisis, could face much higher power bills next year.
Eskom also expects a final decision on a new $476 million World Bank loan to repurpose its Komati coal-fired power plant into a renewable station before the COP27 summit, chief executive Andre de Ruyter said on Friday.
He was speaking at the 2nd Southern Africa Oil and Gas Conference convened in Cape Town under the theme: “Shifting gear: towards a sustainable oil and gas future for Southern Africa.”
De Ruyter told delegates he was in favour of using gas in the electricity mix.
“Gas has a role to play in the future energy mix as evidenced by many studies – more specifically as a transition fuel to reduce emissions,” he said.
However, De Ruyter said it would take up to five years to build a fully functional gas-powered power station. Solar was the fastest to build – around 12 to 18 months and a nuclear power plant would take up to 15 years to build.
“New conventional nuclear is unlikely to be successful because it is a mega-project and mega-projects are very difficult to execute, such as Medupi and Kusile have proven,” De Ruyter told Weekend Argus on the sideline.
Economic and political analyst Dr Dale McKinley said Biden’s latest funding move was too little, too late.
“The northern developed countries have a historical and moral duty to not only fund the vast majority of this but to push it, given their history in ensuring that countries in the global south, or basically the engine rooms for fossil fuels, basically fuel the growth of their own economy.”
“It is to be welcomed, but it should be much much more and much much faster,” he said.
CEO of the Petroleum Agency of South Africa (PASA), Dr Phindile Masangane, said the country was ready for the gas and oil industry.
“The industry is actually part of our energy mix even if we transition into a cleaner energy mix.”
Masangane told delegates at the summit that oil and gas could be a boost to tax revenues.
TotalEnergies offshore gas field could, according to Masangane, make a direct annual contribution of at least R8bn ($457 million) to the public purse.
“That is not just the overall GDP contribution but is the direct fiscal contribution from the royalties as well as the primary taxes,” she said.
TotalEnergies lodged its production licence application for Block 11B/12B on September 5 before a deadline expired which might have seen the oil major forfeit its right to develop two huge gas field discoveries – Brulpadda and Luiperd off South Africa’s southern coast. Development of the field will represent a major milestone in South Africa reducing its dependence on imported oil and refined petroleum products, although new gas and oil projects are being challenged in courts amid environmental concerns.
The National Business Initiative, a coalition of businesses that includes Sasol, recently released a report which made it clear that South Africa does not need much oil and gas and investing in gas would be a mistake.
The report, dubbed The Role of Gas in South Africa’s Path to Net Zero, said the electricity sector needs only 17 petajoules (PJ) of gas a year until 2035. South Africa already imports 180 PJ a year from Mozambique.
The government’s Council for Scientific and Industrial Research (CSIR) agency also questioned South Africa’s need for gas and punted renewables, transmission infrastructure and battery storage.
PASA was also still pushing for fracking in the Karoo.
“It would be beneficial to South Africa to exploit those resources,” Masangane told Weekend Argus.
“However, we want to approach the Karoo with caution ... it’s a dry area. We are studying the environment so that we know the quality of water before fracking started and also to see if it will bring about earthquakes.”
Energy expert, Ted Blom, said: “Many wars have also started over oil and gas if one does root cause analysis ... so while the beneficiaries will pronounce it a profound blessing, it doesn’t necessarily follow that the bulk of the citizens will benefit.”
Another industry expert Clyde Mallinson cautioned that new gas-to-power installations should not be contemplated.
“It does not make economical sense, it doesn’t make carbon emissions sense. It is entirely unnecessary.”
A number of exploration permits for oil and gas off the country’s coastal regions have been declared unlawful by the courts following complaints over their impact on the environment.
Weekend Argus.