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Tuesday, 29 October 2013

Western Cape set for an oil & gas boom

Posted in Petrochemicals / Oil and Gas, Manufacturing

Western Cape set for an oil & gas boom
There is a concern that government’s existing crude storage facilities in Saldanha are under-utilised.

The Western Cape is set for a potential oil and gas boom in the next five years. This is a really exciting prospect for our region and local industry. Projects that are planned could inject billions of Rands into the local and national economies and more importantly, strengthen South Africa’s energy security and reduce its dependence on coal-generated electricity. 

There are some major infrastructure projects that could contribute to an oil and gas boom. 

The first is the giant R2billion coastal oil terminal in Saldanha, planned for completion by 2017. It is estimated to be the biggest crude oil blending terminal in Africa and expected to attract Eastern buyers of refined West African and South American crude oil, which it will be ideally suited to process. 

The second has both Australian and US investment interests. The Ibhubesi gas project is an offshore venture 400km north of Cape Town. Its commercialisation is very much in line with South Africa’s Integrated Resource Plan, which sets challenging targets – for gas-fired power generation in South Africa to be expanded more than five-fold by 2030 – and therefore needs these kinds of original infrastructure developments. 

The third interesting project is the Western Cape’s first permanent liquefied petroleum gas (LPG) storage facility also based in Saldanha. This is set to double the existing LPG storage capacity in South Africa. Storage of LPG has long been an issue in the region. A steady LPG supply will mean that energy-dependent companies can better manage their energy demands and reduce vulnerability to the erratic energy price fluctuations of recent years. Western Cape consumers, perhaps SA’s second largest market for LPG, will also benefit. 

Developments such as these are hugely positive for our region, but as with any developments of this nature there will be concern about negative impacts on the local coastal environment. I believe there is also a concern that government’s existing crude storage facilities in Saldanha are under-utilised and that investment in additional storage capacity is not warranted.

That being said, the Saldanha port is uniquely positioned with ideal physical attributes to handle large crude carriers.  Also, on a geopolitical level, South Africa is well-positioned as a hub for blending, storage and transshipment of crude.   Overall, I believe the significant size of these projects will help to further propel the economic development of the West Coast as an important energy node and, by way of securing a steady supply of natural gas, will strengthen our alternative energy sources relative to coal. This surely must be argued as positive not just for the economy but for the environment too. 

These projects hold massive potential to stimulate regional economic activity, position the Western Cape as a hub for oil and gas companies, create jobs, strengthen the momentum behind the IDZ (Industrial Development Zone) designated in the area and contribute to government taxes. Consumers should also benefit from reduced dependence on energy imports. 

For the next big development, we will look east, not west. A liquefied natural gas (LNG) import facility is planned for Mossel Bay, to provide feedstock for PetroSA’s Mossgas refinery. That announcement is expected next year and looking at global shifts towards LNG, I believe this is a project to watch. 

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