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Saldanha Bay - A R1.02bn facility near Saldanha Bay is set to alleviate South Africa's gas shortage and broaden its energy mix.
Sunrise Energy revealed its new Liquefied Petroleum Gas (LPG) import and storage facility on Monday in a move that is likely to boost the gas's availability in South Africa. The facility received its first load from a LPG ship in May and facility manager William Bopape said his port has been busy ever since.
The facility is in many ways a pioneer in the gas sector, with South Africa owning only one significant other import facility in Richards Bay. Pieter Coetzee, CEO of Sunrise Energy, said establishing the plant was not an easy venture, because the industry is still in its infancy. He said Sunrise had to take full market risk, but he believed the facility would open up the LPG market, especially in the Western Cape.
Worldwide countries use an average of 20% of gas for their energy needs, but in South Africa it is only 3%.
Energy Minister Mmamoloko Kubayi said on Monday at the the unveiling of the facility that LPG is under-utilised in South Africa.
She said unlike other years there has been no emergency briefing this year due to a shortage of LPG. "I believe this facility contributed to that."
She said LPG should be promoted to the same level of other energy sources, adding that the government is investigating the deregulation of LPG pricing as infrastructure such Sunrise develops.
Sunrise's significant enhancement of the market will bring competition to the gas market and bring prices down, said Minister of Economic Development Ebrahim Patel on Monday. He said gas was cleaner and cheaper. "Potentially this facility could bring down cost of production of business and household spend."
He said the plant was a R1bn injection into the economy. "There are now economic opportunities for others to access the gas and distribute it."
SA's to switch to gas
The plant will be the largest open-access LPG import and storage facility in Africa and operates on an open-access model. The developers feel that this will enable the entry of new participants in the LPG industry, creating more competition in the market. Sunrise Energy itself does not own or trade LPG, but merely manages the plant.
South Africans still widely used more inefficient energy sources for cooking and heating such as electricity and wood, whereas LPG represented a much cheaper and cleaner source, Coetzee said.
Sunrise Energy CEO Piet Coetzee at the Saldanha Bay LPG facility (Pic: Yolandi Groenewald, Fin24)
READ:SA gas suppliers can't keep up
Albertinah Kekena, chairperson of the Mining Oil and Gas Services (MOGS), also believed that the public private partnership model of the venture will increase availability and stimulate market growth. She said elsewhere in Africa the facilities were either owned by the producer itself or by government.
"Ours will be open access, free from conflicts of interest," she said. "We will be an impartial operator."
Sunrise Energy is 60% owned by MOGS with IDC holding a 31% stake. Roybal Bafokeng Holdings owns 51% of MOGS with the rest of the company owned by the Public Investment Corporation.
Entrance to the facility at Saldanha Bay (Pic: Yolandi Groenewald, Fin24)
The facility is also set to boost job creation in the region, with Sunrise Energy claiming that 1 750 jobs will be created downstream as a result of the facility. But the developers stress that the real benefit of the facility will be making LPG more readily available to the local market.
Patel said up to now much of the benefit of cheap gas was not flowing to ordinary South Africans. The Competition Commission in April released a report that stressed the need for more LPG import capacity to enable greater competition in the LPG industry.
READ: LPG sector needs better price regulation - competition watchdog
Currently two suppliers are feeding their LPG into the facility, including Botafogo Gas. Gas are mostly sourced from the West African coast, but also from the Middle East. But Coetzee said the facility would be working with all credible suppliers that are interested.
Gas companies will then send trucks to load the gas, before distributing it to customers on the ground.
Sunrise Energy's LPG import and storage facility in Saldanha Bay (Pic: Yolandi Groenewald, Fin24)
"We are positive that by Winter 2018 we will be able to transport LPG per rail as far as the Free State," she said.
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